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

Yulon Nissan Motor Co., Ltd (TWSE:2227) has announced that on 25th of September, it will be paying a dividend ofNT$3.48, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 2.9% will still be comparable to other companies in the industry.

View our latest analysis for Yulon Nissan Motor

Yulon Nissan Motor's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Yulon Nissan Motor's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, could fall by 23.0% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 76%, which is definitely on the higher side.

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. Since 2014, the dividend has gone from NT$13.30 total annually to NT$3.48. Dividend payments have fallen sharply, down 74% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Yulon Nissan Motor's earnings per share has shrunk at 23% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Yulon Nissan Motor you should be aware of, and 2 of them are a bit unpleasant. Is Yulon Nissan Motor not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.