Lumax International (TWSE:6192) Has Announced That It Will Be Increasing Its Dividend To NT$5.50

Lumax International Corp., Ltd. (TWSE:6192) has announced that it will be increasing its periodic dividend on the 22nd of May to NT$5.50, which will be 10% higher than last year's comparable payment amount of NT$5.00. This makes the dividend yield about the same as the industry average at 4.4%.

See our latest analysis for Lumax International

Lumax International's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Lumax International 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.

Looking forward, earnings per share could rise by 0.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 65% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from NT$3.7 total annually to NT$5.00. This implies that the company grew its distributions at a yearly rate of about 3.0% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

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, Lumax International's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.2% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Lumax International's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Lumax International that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.