CHANG TYPE Industrial's (TWSE:1541) Dividend Will Be Reduced To NT$0.50

CHANG TYPE Industrial Co., Ltd. (TWSE:1541) is reducing its dividend from last year's comparable payment to NT$0.50 on the 20th of September. This means that the dividend yield is 1.6%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for CHANG TYPE Industrial

CHANG TYPE Industrial's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, CHANG TYPE Industrial's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 3.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

CHANG TYPE Industrial's Dividend Has Lacked Consistency

Looking back, CHANG TYPE Industrial's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was NT$1.71 in 2015, and the most recent fiscal year payment was NT$0.50. This works out to a decline of approximately 71% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. However, CHANG TYPE Industrial has only grown its earnings per share at 3.7% per annum over the past five years. While EPS growth is quite low, CHANG TYPE Industrial has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On CHANG TYPE Industrial's Dividend

Overall, we think that CHANG TYPE Industrial could make a reasonable income stock, even though it did cut the dividend this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for CHANG TYPE Industrial you should be aware of, and 1 of them is concerning. 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.

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