E.SUN Financial Holding Company, Ltd.'s (TPE:2884) 2.3% Dividend Yield Looks Pretty Interesting

Today we'll take a closer look at E.SUN Financial Holding Company, Ltd. (TPE:2884) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.

A 2.3% yield is nothing to get excited about, but investors probably think the long payment history suggests E.SUN Financial Holding Company has some staying power. Some simple research can reduce the risk of buying E.SUN Financial Holding Company for its dividend - read on to learn more.

Explore this interactive chart for our latest analysis on E.SUN Financial Holding Company!

Payout ratios

Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Looking at the data, we can see that 43% of E.SUN Financial Holding Company's profits were paid out as dividends in the last 12 months. A medium payout ratio strikes a good balance between paying dividends, and keeping enough back to invest in the business. One of the risks is that management reinvests the retained capital poorly instead of paying a higher dividend.

Remember, you can always get a snapshot of E.SUN Financial Holding Company's latest financial position, by checking our visualisation of its financial health.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. For the purpose of this article, we only scrutinise the last decade of E.SUN Financial Holding Company's dividend payments. During this period the dividend has been stable, which could imply the business could have relatively consistent earnings power. During the past 10-year period, the first annual payment was NT$0.09 in 2011, compared to NT$0.6 last year. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time.

It's rare to find a company that has grown its dividends rapidly over 10 years and not had any notable cuts, but E.SUN Financial Holding Company has done it, which we really like.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. Earnings have grown at around 5.1% a year for the past five years, which is better than seeing them shrink! Earnings per share have been growing at a credible rate. What's more, the payout ratio is reasonable and provides some protection to the dividend, or even the potential to increase it.

Conclusion

To summarise, shareholders should always check that E.SUN Financial Holding Company's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. Firstly, we like that E.SUN Financial Holding Company has a low and conservative payout ratio. Earnings growth has been limited, but we like that the dividend payments have been fairly consistent. E.SUN Financial Holding Company has a number of positive attributes, but falls short of our ideal dividend company. It may be worth a look at the right price, though.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 10 analysts we track are forecasting for E.SUN Financial Holding Company for free with public analyst estimates for the company.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

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This article by Simply Wall St is general in nature. 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.
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