Goodway Machine's (TWSE:1583) Shareholders Will Receive A Bigger Dividend Than Last Year

Goodway Machine Corp. (TWSE:1583) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of September to NT$4.00. This will take the dividend yield to an attractive 6.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for Goodway Machine

Goodway Machine's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Goodway Machine's dividend made up quite a large proportion of earnings but only 52% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, could fall by 0.8% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 77%, meaning that most of the company's earnings is being paid out to shareholders.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was NT$1.79, compared to the most recent full-year payment of NT$4.00. This means that it has been growing its distributions at 8.3% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Goodway Machine might have put its house in order since then, but we remain cautious.

Goodway Machine May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Goodway Machine's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Goodway Machine that investors should take into consideration. 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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