NAK Sealing Technologies' (TWSE:9942) Upcoming Dividend Will Be Larger Than Last Year's

NAK Sealing Technologies Corporation (TWSE:9942) will increase its dividend from last year's comparable payment on the 30th of August to NT$7.00. This will take the annual payment to 5.5% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for NAK Sealing Technologies

NAK Sealing Technologies' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, NAK Sealing Technologies' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 15.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 54% 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 2014, the annual payment back then was NT$5.00, compared to the most recent full-year payment of NT$7.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.4% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. NAK Sealing Technologies has seen EPS rising for the last five years, at 16% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like NAK Sealing Technologies' Dividend

Overall, a dividend increase is always good, and we think that NAK Sealing Technologies is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for NAK Sealing Technologies that investors should take into consideration. Is NAK Sealing Technologies 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.

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