Sunonwealth Electric Machine Industry (TWSE:2421) Has Announced That It Will Be Increasing Its Dividend To NT$3.50

The board of Sunonwealth Electric Machine Industry Co., Ltd. (TWSE:2421) has announced that it will be paying its dividend of NT$3.50 on the 26th of July, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

Check out our latest analysis for Sunonwealth Electric Machine Industry

Sunonwealth Electric Machine Industry's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Sunonwealth Electric Machine Industry was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 99.6%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was NT$1.00, compared to the most recent full-year payment of NT$3.50. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Sunonwealth Electric Machine Industry has impressed us by growing EPS at 17% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Sunonwealth Electric Machine Industry Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Sunonwealth Electric Machine Industry that you should be aware of before investing. 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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