Makalot Industrial (TWSE:1477) Will Pay A Larger Dividend Than Last Year At NT$16.40

The board of Makalot Industrial Co., Ltd. (TWSE:1477) has announced that the dividend on 26th of April will be increased to NT$16.40, which will be 13% higher than last year's payment of NT$14.50 which covered the same period. This makes the dividend yield about the same as the industry average at 3.6%.

View our latest analysis for Makalot Industrial

Makalot Industrial's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend made up a very large portion of earnings and also represented 92% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Earnings per share is forecast to rise by 38.4% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 79% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of NT$5.46 in 2014 to the most recent total annual payment of NT$14.50. This means that it has been growing its distributions at 10% per annum over that time. 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.

Makalot Industrial's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Makalot Industrial has seen EPS rising for the last five years, at 20% per annum. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

Our Thoughts On Makalot Industrial's Dividend

Overall, we always like to see the dividend being raised, but we don't think Makalot Industrial will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Makalot Industrial that you should be aware of before investing. Is Makalot Industrial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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

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.