Stock Analysis

Waffer Technology's (TWSE:6235) Upcoming Dividend Will Be Larger Than Last Year's

TWSE:6235
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Waffer Technology Corporation (TWSE:6235) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of April to NT$1.68. Even though the dividend went up, the yield is still quite low at only 1.5%.

See our latest analysis for Waffer Technology

Waffer Technology's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Waffer Technology was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 10%, which makes us pretty comfortable with the sustainability of the dividend.

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TWSE:6235 Historic Dividend March 10th 2024

Waffer Technology's Dividend Has Lacked Consistency

Looking back, Waffer Technology's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of NT$1.99 in 2017 to the most recent total annual payment of NT$1.68. This works out to be a decline of approximately 2.4% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Waffer Technology has grown earnings per share at 33% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On Waffer Technology's Dividend

Overall, we always like to see the dividend being raised, but we don't think Waffer Technology will make a great income stock. While Waffer Technology is earning enough to cover the payments, the cash flows are lacking. We don't think Waffer Technology is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Waffer Technology that investors need to be conscious of moving forward. Is Waffer Technology 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.