Lungteh Shipbuilding's (TWSE:6753) Dividend Will Be Increased To NT$1.10

Lungteh Shipbuilding Co., Ltd. (TWSE:6753) will increase its dividend from last year's comparable payment on the 19th of September to NT$1.10. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

View our latest analysis for Lungteh Shipbuilding

Lungteh Shipbuilding's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Lungteh Shipbuilding's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 29.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.

Lungteh Shipbuilding's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of NT$0.474 in 2021 to the most recent total annual payment of NT$1.10. This implies that the company grew its distributions at a yearly rate of about 32% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Lungteh Shipbuilding has been growing its earnings per share at 29% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Lungteh Shipbuilding Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

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 Lungteh Shipbuilding that investors need to be conscious of moving forward. 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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