Excelsior Medical (TWSE:4104) Will Pay A Dividend Of NT$3.80

The board of Excelsior Medical Co., Ltd. (TWSE:4104) has announced that it will pay a dividend of NT$3.80 per share on the 22nd of May. This means the annual payment is 4.3% of the current stock price, which is above the average for the industry.

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Excelsior Medical's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Excelsior Medical was paying out 81% of earnings, but a comparatively small 26% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share could rise by 6.3% 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 80%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Excelsior Medical

Excelsior Medical Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of NT$2.16 in 2015 to the most recent total annual payment of NT$3.80. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

We Could See Excelsior Medical's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Excelsior Medical has grown earnings per share at 6.3% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Excelsior Medical's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in Excelsior Medical stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.