Cryomax Cooling System's (TWSE:1587) Dividend Will Be NT$0.50

Cryomax Cooling System Corp. (TWSE:1587) will pay a dividend of NT$0.50 on the 11th of July. This payment means the dividend yield will be 1.4%, which is below the average for the industry.

Check out our latest analysis for Cryomax Cooling System

Cryomax Cooling System Might Find It Hard To Continue The Dividend

If it is predictable over a long period, even low dividend yields can be attractive. Even though Cryomax Cooling System is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share could 12.3% over the next year if the trend of the last few years can't be broken. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

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Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of NT$0.937 in 2015 to the most recent total annual payment of NT$0.478. The dividend has shrunk at around 6.5% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Cryomax Cooling System's EPS has fallen by approximately 12% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

An additional note is that the company has been raising capital by issuing stock equal to 11% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Cryomax Cooling System's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Cryomax Cooling System make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Cryomax Cooling System (of which 2 are a bit unpleasant!) you should know about. Is Cryomax Cooling System not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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