Shihlin Electric & Engineering's (TWSE:1503) Dividend Will Be Increased To NT$3.00

Shihlin Electric & Engineering Corp. (TWSE:1503) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of August to NT$3.00. Even though the dividend went up, the yield is still quite low at only 1.1%.

See our latest analysis for Shihlin Electric & Engineering

Shihlin Electric & Engineering's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Shihlin Electric & Engineering was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 37.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

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. The dividend has gone from an annual total of NT$1.40 in 2014 to the most recent total annual payment of NT$3.00. This means that it has been growing its distributions at 7.9% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Shihlin Electric & Engineering has seen EPS rising for the last five years, at 11% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Shihlin Electric & Engineering Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Shihlin Electric & Engineering is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Shihlin Electric & Engineering management tenure, salary, and performance. Is Shihlin Electric & Engineering not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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