Quang Viet Enterprise (TWSE:4438) Has Announced That Its Dividend Will Be Reduced To NT$5.20

Quang Viet Enterprise Co., Ltd. (TWSE:4438) has announced that on 26th of September, it will be paying a dividend ofNT$5.20, which a reduction from last year's comparable dividend. However, the dividend yield of 4.5% still remains in a typical range for the industry.

View our latest analysis for Quang Viet Enterprise

Quang Viet Enterprise's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Quang Viet Enterprise's dividend made up quite a large proportion of earnings but only 30% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 32.9%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 62% which would be quite comfortable going to take the dividend forward.

Quang Viet Enterprise's Dividend Has Lacked Consistency

It's comforting to see that Quang Viet Enterprise has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of NT$7.20 in 2016 to the most recent total annual payment of NT$5.20. This works out to be a decline of approximately 4.0% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Quang Viet Enterprise May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. In the last five years, Quang Viet Enterprise's earnings per share has shrunk at approximately 4.6% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Quang Viet Enterprise's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Quang Viet Enterprise that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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