Vizionfocus' (TWSE:4771) Shareholders Will Receive A Bigger Dividend Than Last Year

Vizionfocus Inc. (TWSE:4771) will increase its dividend from last year's comparable payment on the 14th of August to NT$3.57. Despite this raise, the dividend yield of 1.2% is only a modest boost to shareholder returns.

Check out our latest analysis for Vizionfocus

Vizionfocus' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Vizionfocus is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The EPS could grow by 214.7% over the next 12 months if they look similar to the last few years. Assuming the dividend continues along recent trends, we think the payout ratio will be 10.0%, which makes us pretty comfortable with the sustainability of the dividend.

Vizionfocus Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2022, the dividend has gone from NT$1.50 total annually to NT$3.57. This implies that the company grew its distributions at a yearly rate of about 54% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Vizionfocus has impressed us by growing EPS at 215% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

An additional note is that the company has been raising capital by issuing stock equal to 11% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Vizionfocus (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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