Union Bank of Taiwan (TWSE:2838) Is Paying Out A Larger Dividend Than Last Year

Union Bank of Taiwan (TWSE:2838) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of August to NT$0.20. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.

Check out our latest analysis for Union Bank of Taiwan

Union Bank of Taiwan's Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Union Bank of Taiwan has established itself as a dividend paying company, given its 9-year history of distributing earnings to shareholders. While past data isn't a guarantee for the future, Union Bank of Taiwan's latest earnings report puts its payout ratio at 19%, showing that the company can pay out its dividends comfortably.

Looking forward, earnings per share could rise by 5.9% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the future payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

Union Bank of Taiwan's Dividend Has Lacked Consistency

Looking back, Union Bank of Taiwan's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the dividend has gone from NT$0.171 total annually to NT$0.20. This implies that the company grew its distributions at a yearly rate of about 1.7% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Union Bank of Taiwan Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Union Bank of Taiwan has been growing its earnings per share at 5.9% a year over the past five years. Union Bank of Taiwan definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Union Bank of Taiwan's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Union Bank of Taiwan stock. 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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