Hanpin Electron (TWSE:2488) Has Announced That It Will Be Increasing Its Dividend To NT$2.80

Hanpin Electron Co., Ltd. (TWSE:2488) will increase its dividend from last year's comparable payment on the 25th of October to NT$2.80. This takes the dividend yield to 6.2%, which shareholders will be pleased with.

See our latest analysis for Hanpin Electron

Hanpin Electron's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Hanpin Electron was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the trend of the last few years continues, EPS will grow by 0.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 60% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was NT$2.00, compared to the most recent full-year payment of NT$2.80. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Hanpin Electron's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 0.9% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Hanpin Electron's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Hanpin Electron that investors should know about before committing capital to this stock. Is Hanpin Electron 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.

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