Grape King Bio's (TWSE:1707) Dividend Will Be NT$6.90

The board of Grape King Bio Ltd (TWSE:1707) has announced that it will pay a dividend of NT$6.90 per share on the 18th of July. The dividend yield will be 4.3% based on this payment which is still above the industry average.

View our latest analysis for Grape King Bio

Grape King Bio's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Grape King Bio was paying out 71% of earnings, but a comparatively small 52% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 8.1%. If the dividend continues on this path, the payout ratio could be 68% by next year, which we think can be pretty sustainable going forward.

Grape King Bio 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$5.00 in 2014 to the most recent total annual payment of NT$6.90. This means that it has been growing its distributions at 3.3% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. However, Grape King Bio's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

We Really Like Grape King Bio's Dividend

Overall, we like to see the dividend staying consistent, and we think Grape King Bio might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for Grape King Bio for free with public analyst estimates for the company. Is Grape King Bio not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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