Chiu Ting Machinery (TWSE:1539) Is Reducing Its Dividend To NT$0.60

Chiu Ting Machinery Co., Ltd. (TWSE:1539) has announced that on 20th of September, it will be paying a dividend ofNT$0.60, which a reduction from last year's comparable dividend. This means that the annual payment will be 2.5% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Chiu Ting Machinery

Chiu Ting Machinery's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Chiu Ting Machinery was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 7.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Chiu Ting Machinery's Dividend Has Lacked Consistency

It's comforting to see that Chiu Ting Machinery has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of NT$0.89 in 2015 to the most recent total annual payment of NT$0.60. The dividend has shrunk at around 4.3% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Chiu Ting Machinery has impressed us by growing EPS at 7.4% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Even though the dividend was cut this year, we think Chiu Ting Machinery has the ability to make consistent payments in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Chiu Ting Machinery that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.