SciVision Biotech (TWSE:1786) Has Announced That It Will Be Increasing Its Dividend To NT$2.50

The board of SciVision Biotech Inc. (TWSE:1786) has announced that it will be paying its dividend of NT$2.50 on the 16th of August, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.9%, which is below 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 SciVision Biotech's stock price has increased by 37% 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 SciVision Biotech

SciVision Biotech's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Before this announcement, SciVision Biotech was paying out 85% of earnings, but a comparatively small 59% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share could rise by 16.7% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 89%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

SciVision Biotech's Dividend Has Lacked Consistency

It's comforting to see that SciVision Biotech has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 8 years was NT$0.439 in 2016, and the most recent fiscal year payment was NT$2.50. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

SciVision Biotech Might Find It Hard To Grow Its Dividend

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. SciVision Biotech has seen EPS rising for the last five years, at 17% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think SciVision Biotech'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 SciVision Biotech 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for SciVision Biotech that you should be aware of before investing. Is SciVision Biotech 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.

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