Eastech Holding (TWSE:5225) Is Paying Out A Larger Dividend Than Last Year

The board of Eastech Holding Limited (TWSE:5225) has announced that it will be paying its dividend of NT$6.57 on the 22nd of April, an increased payment from last year's comparable dividend. This makes the dividend yield 5.7%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Eastech Holding's stock price has increased by 93% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Eastech Holding

Eastech Holding's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 82% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS could expand by 13.1% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 69% which brings it into quite a comfortable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from NT$5.00 total annually to NT$6.61. This implies that the company grew its distributions at a yearly rate of about 2.8% 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 Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Eastech Holding has grown earnings per share at 13% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

We should note that Eastech Holding has issued stock equal to 14% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Eastech Holding's payments are rock solid. 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 Eastech Holding is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for Eastech Holding that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.