Taiwan Fertilizer (TWSE:1722) Is Paying Out A Larger Dividend Than Last Year

The board of Taiwan Fertilizer Co., Ltd. (TWSE:1722) has announced that it will be paying its dividend of NT$2.60 on the 16th of September, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 4.2%.

Check out our latest analysis for Taiwan Fertilizer

Taiwan Fertilizer's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Taiwan Fertilizer was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 9.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 64% by next year, which we think can be pretty sustainable going forward.

Taiwan Fertilizer Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was NT$2.00 in 2014, and the most recent fiscal year payment was NT$2.60. This works out to be a compound annual growth rate (CAGR) of approximately 2.7% a year over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Taiwan Fertilizer has seen EPS rising for the last five years, at 9.2% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Taiwan Fertilizer's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on Taiwan Fertilizer management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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