104's (TWSE:3130) Dividend Will Be Increased To NT$13.61

The board of 104 Corporation (TWSE:3130) has announced that it will be paying its dividend of NT$13.61 on the 8th of August, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.8%, which shareholders will be pleased with.

View our latest analysis for 104

104 Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, 104's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Over the next year, EPS could expand by 10.0% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, we think the payout ratio could reach 98%, which probably can't continue without starting to put some pressure on the balance sheet.

104 Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was NT$4.55, compared to the most recent full-year payment of NT$13.61. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

There Isn't Much Room To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that 104 has grown earnings per share at 10.0% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Our Thoughts On 104's Dividend

In summary, while it's always good to see the dividend being raised, we don't think 104's payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

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. For instance, we've picked out 1 warning sign for 104 that investors should take into consideration. 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.

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