Taita Chemical Company (TWSE:1309) Is Paying Out Less In Dividends Than Last Year

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 1.9%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Taita Chemical Company

Taita Chemical Company Might Find It Hard To Continue The Dividend

Even a low dividend yield can be attractive if it is sustained for years on end. Even though Taita Chemical Company is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share is forecast to rise by 94.4% over the next year. This is the right direction to be moving, but it is not enough to achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Taita Chemical Company's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of NT$0.165 in 2019 to the most recent total annual payment of NT$0.30. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

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. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

We're Not Big Fans Of Taita Chemical Company'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 seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 1 warning sign for Taita Chemical Company 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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