Carnival Industrial (TWSE:1417) Will Pay A Smaller Dividend Than Last Year

Carnival Industrial Corporation's (TWSE:1417) dividend is being reduced from last year's payment covering the same period to NT$0.20 on the 29th of August. This means that the annual payment is 1.8% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Carnival Industrial

Carnival Industrial's Distributions May Be Difficult To Sustain

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even though Carnival Industrial isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

EPS has fallen by an average of 0.5% in the past, so this could continue over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was NT$0.40 in 2014, and the most recent fiscal year payment was NT$0.20. This works out to be a decline of approximately 6.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Although it's important to note that Carnival Industrial's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Carnival Industrial is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Carnival Industrial has 3 warning signs (and 1 which is concerning) we think you should know about. Is Carnival Industrial 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com