Taiyen Biotech's (TWSE:1737) Dividend Will Be Reduced To NT$1.20

Taiyen Biotech Co., Ltd.'s (TWSE:1737) dividend is being reduced from last year's payment covering the same period to NT$1.20 on the 16th of September. This means that the annual payment will be 3.5% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Taiyen Biotech

Taiyen Biotech's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Taiyen Biotech was paying out quite a large proportion of both earnings and cash flow, with the dividend being 259% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to fall by 8.4% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 94%, which is definitely on the higher side.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was NT$0.50 in 2014, and the most recent fiscal year payment was NT$1.20. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Taiyen Biotech's earnings per share has fallen at approximately 8.4% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Taiyen Biotech that investors should know about before committing capital to this stock. Is Taiyen Biotech not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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