Eternal Materials' (TWSE:1717) Dividend Will Be Increased To NT$1.20

Eternal Materials Co., Ltd. (TWSE:1717) has announced that it will be increasing its periodic dividend on the 23rd of May to NT$1.20, which will be 50% higher than last year's comparable payment amount of NT$0.80. This takes the annual payment to 2.7% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Eternal Materials

Eternal Materials' Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last dividend, Eternal Materials is earning enough to cover the payment, but then it makes up 185% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, could fall by 3.7% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 83% in the next 12 months which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of NT$1.18 in 2015 to the most recent total annual payment of NT$0.80. The dividend has shrunk at around 3.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Eternal Materials May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, Eternal Materials' earnings per share has shrunk at approximately 3.7% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Eternal Materials' Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Eternal Materials will make a great income stock. While Eternal Materials is earning enough to cover the payments, the cash flows are lacking. We don't think Eternal Materials is a great stock to add to your portfolio if income is your focus.

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. Just as an example, we've come across 3 warning signs for Eternal Materials you should be aware of, and 2 of them are a bit unpleasant. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.