Taiwan Secom (TWSE:9917) Is Paying Out A Larger Dividend Than Last Year

Taiwan Secom Co., Ltd.'s (TWSE:9917) dividend will be increasing from last year's payment of the same period to NT$5.20 on 16th of July. Based on this payment, the dividend yield for the company will be 4.1%, which is fairly typical for the industry.

See our latest analysis for Taiwan Secom

Taiwan Secom's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Taiwan Secom was paying out quite a large proportion of both earnings and cash flow, with the dividend being 1,357% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 4.8% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 88% which is a bit high but can definitely be sustainable.

Taiwan Secom Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from NT$3.45 total annually to NT$5.20. This implies that the company grew its distributions at a yearly rate of about 4.2% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 4.8% a year for the past five years, which isn't massive but still better than seeing them shrink. Taiwan Secom's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Taiwan Secom's payments are rock solid. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Taiwan Secom that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.