Mega Financial Holding (TWSE:2886) Is Increasing Its Dividend To NT$1.50

The board of Mega Financial Holding Co., Ltd. (TWSE:2886) has announced that it will be paying its dividend of NT$1.50 on the 13th of September, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.5%, which shareholders will be pleased with.

View our latest analysis for Mega Financial Holding

Mega Financial Holding's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Mega Financial Holding has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Mega Financial Holding's payout ratio of 62% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 1.0%. The future payout ratio could be 72% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Mega Financial Holding Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of NT$1.07 in 2014 to the most recent total annual payment of NT$1.50. This means that it has been growing its distributions at 3.4% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Mega Financial Holding May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings have grown at around 3.5% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 3.5% 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.

We Really Like Mega Financial Holding's Dividend

Overall, a dividend increase is always good, and we think that Mega Financial Holding is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Mega Financial Holding has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Mega Financial Holding 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com