Ten Ren Tea (TWSE:1233) Is Paying Out A Larger Dividend Than Last Year

The board of Ten Ren Tea Co., Ltd. (TWSE:1233) has announced that it will be paying its dividend of NT$0.90 on the 12th of August, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 2.7%.

Check out our latest analysis for Ten Ren Tea

Ten Ren Tea's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. The last payment made up 84% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

If the company can't turn things around, EPS could fall by 11.5% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 85%, meaning that most of the company's earnings is being paid out to shareholders.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of NT$2.30 in 2014 to the most recent total annual payment of NT$0.90. Doing the maths, this is a decline of about 9.0% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Ten Ren Tea's EPS has fallen by approximately 12% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Ten Ren Tea's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Ten Ren Tea's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Ten Ren Tea is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Ten Ren Tea you should be aware of, and 1 of them is a bit 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.