Yulon Nissan Motor (TWSE:2227) Has Announced That Its Dividend Will Be Reduced To NT$3.48

Yulon Nissan Motor Co., Ltd's (TWSE:2227) dividend is being reduced from last year's payment covering the same period to NT$3.48 on the 1st of January. However, the dividend yield of 2.6% still remains in a typical range for the industry.

View our latest analysis for Yulon Nissan Motor

Yulon Nissan Motor's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Yulon Nissan Motor was paying out quite a large proportion of both earnings and cash flow, with the dividend being 266% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

If the company can't turn things around, EPS could fall by 26.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 94%, which is definitely on the higher side.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of NT$13.30 in 2014 to the most recent total annual payment of NT$3.48. The dividend has fallen 74% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Yulon Nissan Motor's EPS has fallen by approximately 26% 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.

Yulon Nissan Motor's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Yulon Nissan Motor has 3 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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