Lemtech Holdings (TWSE:4912) Has Announced That It Will Be Increasing Its Dividend To NT$0.712

The board of Lemtech Holdings Co., Limited (TWSE:4912) has announced that it will be paying its dividend of NT$0.712 on the 24th of October, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.6%, which is below the industry average.

View our latest analysis for Lemtech Holdings

Lemtech Holdings' Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Lemtech Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 1.0% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 37%, 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 dividend has gone from an annual total of NT$2.17 in 2014 to the most recent total annual payment of NT$1.67. This works out to be a decline of approximately 2.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Lemtech Holdings May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Lemtech Holdings hasn't seen much change in its earnings per share over the last five years.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Lemtech Holdings' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 1 warning sign for Lemtech Holdings that investors need to be conscious of moving forward. Is Lemtech Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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