Hey Song (TWSE:1234) Is Due To Pay A Dividend Of NT$1.90

The board of Hey Song Corporation (TWSE:1234) has announced that it will pay a dividend on the 25th of July, with investors receiving NT$1.90 per share. The dividend yield will be 4.6% based on this payment which is still above the industry average.

Check out our latest analysis for Hey Song

Hey Song's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. We think that this practice can make the dividend quite risky in the future.

Earnings per share could rise by 3.7% over the next year if things go the same way as they have for the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 77%, which is on the higher side, but certainly still feasible.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was NT$2.00, compared to the most recent full-year payment of NT$1.90. Payments have been decreasing at a very slow pace in this time period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

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. Earnings has been rising at 3.7% per annum over the last five years, which admittedly is a bit slow. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Hey Song that investors should know about before committing capital to this stock. Is Hey Song 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.