Is Bioptik Technology Incorporation (GTSM:4161) A Strong Dividend Stock?

Could Bioptik Technology Incorporation (GTSM:4161) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.

With a 2.3% yield and a five-year payment history, investors probably think Bioptik Technology Incorporation looks like a reliable dividend stock. A low yield is generally a turn-off, but if the prospects for earnings growth were strong, investors might be pleasantly surprised by the long-term results. The company also bought back stock during the year, equivalent to approximately 2.9% of the company's market capitalisation at the time. Some simple analysis can reduce the risk of holding Bioptik Technology Incorporation for its dividend, and we'll focus on the most important aspects below.

Explore this interactive chart for our latest analysis on Bioptik Technology Incorporation!

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. While Bioptik Technology Incorporation pays a dividend, it reported a loss over the last year. When a company recently reported a loss, we should investigate if its cash flows covered the dividend.

Last year, Bioptik Technology Incorporation paid a dividend while reporting negative free cash flow. While there may be an explanation, we think this behaviour is generally not sustainable.

Consider getting our latest analysis on Bioptik Technology Incorporation's financial position here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Looking at the data, we can see that Bioptik Technology Incorporation has been paying a dividend for the past five years. During the past five-year period, the first annual payment was NT$0.5 in 2015, compared to NT$0.6 last year. Dividends per share have grown at approximately 4.8% per year over this time. Bioptik Technology Incorporation's dividend payments have fluctuated, so it hasn't grown 4.8% every year, but the CAGR is a useful rule of thumb for approximating the historical growth.

Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share (EPS) are growing - it's not worth taking the risk on a dividend getting cut, unless you might be rewarded with larger dividends in future. Bioptik Technology Incorporation's EPS have fallen by approximately 30% per year during the past five years. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Bioptik Technology Incorporation's earnings per share, which support the dividend, have been anything but stable.

Conclusion

To summarise, shareholders should always check that Bioptik Technology Incorporation's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. It's a concern to see that the company paid a dividend despite reporting a loss, and the dividend was also not well covered by free cash flow. Earnings per share are down, and Bioptik Technology Incorporation's dividend has been cut at least once in the past, which is disappointing. There are a few too many issues for us to get comfortable with Bioptik Technology Incorporation from a dividend perspective. Businesses can change, but we would struggle to identify why an investor should rely on this stock for their income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Bioptik Technology Incorporation has 4 warning signs (and 2 which are a bit concerning) we think you should know about.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

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This article by Simply Wall St is general in nature. 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.
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