Taita Chemical Company (TWSE:1309) Has Announced That Its Dividend Will Be Reduced To NT$0.30

Taita Chemical Company, Limited's (TWSE:1309) dividend is being reduced from last year's payment covering the same period to NT$0.30 on the 23rd of August. This means that the dividend yield is 1.7%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Taita Chemical Company

Taita Chemical Company'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. Even in the absence of profits, Taita Chemical Company is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Analysts expect the EPS to grow by 94.4% over the next 12 months. This is the right direction to be moving, but it is not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Taita Chemical Company's Dividend Has Lacked Consistency

Taita Chemical Company has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the annual payment back then was NT$0.165, compared to the most recent full-year payment of NT$0.30. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Taita Chemical Company has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Taita Chemical Company's EPS has declined at around 13% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

Taita Chemical Company's Dividend Doesn't Look Great

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. We don't think that this is a great candidate to be an income stock.

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. As an example, we've identified 1 warning sign for Taita Chemical Company that you should be aware of before investing. 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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