USI's (TWSE:1304) Dividend Will Be Reduced To NT$0.35

USI Corporation's (TWSE:1304) dividend is being reduced from last year's payment covering the same period to NT$0.35 on the 23rd of August. This means that the dividend yield is 2.3%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for USI

USI's Distributions May Be Difficult To Sustain

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. USI isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. These payout levels would generally be quite difficult to keep up.

Looking forward, earnings per share could 3.5% over the next year if the trend of the last few years can't be broken. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was NT$0.577, compared to the most recent full-year payment of NT$0.35. Doing the maths, this is a decline of about 4.9% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that USI's earnings per share has fallen at approximately 3.5% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

We're Not Big Fans Of USI's Dividend

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for USI that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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