Chang Hwa Commercial Bank (TWSE:2801) Is Due To Pay A Dividend Of NT$0.55

The board of Chang Hwa Commercial Bank, Ltd. (TWSE:2801) has announced that it will pay a dividend of NT$0.55 per share on the 19th of September. This means that the annual payment will be 2.9% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Chang Hwa Commercial Bank

Chang Hwa Commercial Bank's Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Chang Hwa Commercial Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 45%, which means that Chang Hwa Commercial Bank would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS could expand by 1.6% if recent trends continue. If the dividend continues on this path, the future payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was NT$0.428 in 2014, and the most recent fiscal year payment was NT$0.55. This works out to be a compound annual growth rate (CAGR) of approximately 2.5% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Chang Hwa Commercial Bank hasn't seen much change in its earnings per share over the last five years. Growth of 1.6% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Chang Hwa Commercial Bank that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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