National Aerospace Fasteners' (TWSE:3004) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of National Aerospace Fasteners Corporation (TWSE:3004) has announced that the dividend on 2nd of May will be increased to NT$3.02, which will be 22% higher than last year's payment of NT$2.48 which covered the same period. This makes the dividend yield about the same as the industry average at 2.5%.

Check out our latest analysis for National Aerospace Fasteners

National Aerospace Fasteners' Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, National Aerospace Fasteners was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 22.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2015, the dividend has gone from NT$1.00 total annually to NT$2.48. This means that it has been growing its distributions at 9.5% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

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. Unfortunately, National Aerospace Fasteners' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While EPS growth is quite low, National Aerospace Fasteners has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On National Aerospace Fasteners' Dividend

Overall, we always like to see the dividend being raised, but we don't think National Aerospace Fasteners will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for National Aerospace Fasteners (of which 2 shouldn't be ignored!) you should know about. Is National Aerospace Fasteners not quite the opportunity you were looking for? Why not check out our selection of top 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.