National Aerospace Fasteners (TWSE:3004) Is Paying Out A Larger Dividend Than Last Year

National Aerospace Fasteners Corporation (TWSE:3004) will increase its dividend from last year's comparable payment on the 19th of April to NT$2.48. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

View our latest analysis for National Aerospace Fasteners

National Aerospace Fasteners' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last dividend, National Aerospace Fasteners is earning enough to cover the payment, but then it makes up 250% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, EPS could fall by 0.08% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 44%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 annual payment during the last 10 years was NT$1.00 in 2014, and the most recent fiscal year payment was NT$2.48. This implies that the company grew its distributions at a yearly rate of about 9.5% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. National Aerospace Fasteners might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. National Aerospace Fasteners hasn't seen much change in its earnings per share over the last five years.

National Aerospace Fasteners' Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While National Aerospace Fasteners is earning enough to cover the payments, the cash flows are lacking. We don't think National Aerospace Fasteners is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for National Aerospace Fasteners (of which 2 make us uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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

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.