Universal Cement (TWSE:1104) Is Increasing Its Dividend To NT$1.80

Universal Cement Corporation's (TWSE:1104) dividend will be increasing from last year's payment of the same period to NT$1.80 on 21st of August. This makes the dividend yield 5.0%, which is above the industry average.

Check out our latest analysis for Universal Cement

Universal Cement's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Universal Cement was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

If the trend of the last few years continues, EPS will grow by 11.5% over the next 12 months. If the dividend continues on this path, the payout ratio could be 55% by next year, which we think can be pretty sustainable going forward.

Universal Cement Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of NT$0.807 in 2014 to the most recent total annual payment of NT$1.80. This implies that the company grew its distributions at a yearly rate of about 8.3% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Universal Cement has been growing its earnings per share at 11% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Universal Cement that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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