Quang Viet Enterprise (TWSE:4438) Is Reducing Its Dividend 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. The dividend yield will be in the average range for the industry at 4.7%.

See our latest analysis for Quang Viet Enterprise

Quang Viet Enterprise's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last payment made up 81% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, could fall by 4.6% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 86%, which is definitely on the higher side.

Quang Viet Enterprise's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the annual payment back then was NT$7.20, compared to the most recent full-year 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend 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.

In Summary

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 don't think Quang Viet Enterprise is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Quang Viet Enterprise that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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