Mayer Steel Pipe (TWSE:2020) Is Increasing Its Dividend To NT$2.00

Mayer Steel Pipe Corporation (TWSE:2020) will increase its dividend from last year's comparable payment on the 5th of July to NT$2.00. This will take the dividend yield to an attractive 5.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for Mayer Steel Pipe

Mayer Steel Pipe's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Mayer Steel Pipe 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.

Looking forward, earnings per share could rise by 29.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of NT$0.19 in 2014 to the most recent total annual payment of NT$2.00. This works out to be a compound annual growth rate (CAGR) of approximately 27% 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mayer Steel Pipe has impressed us by growing EPS at 29% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Mayer Steel Pipe could prove to be a strong dividend payer.

We Really Like Mayer Steel Pipe's Dividend

Overall, a dividend increase is always good, and we think that Mayer Steel Pipe is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For instance, we've picked out 2 warning signs for Mayer Steel Pipe that investors should take into consideration. Is Mayer Steel Pipe not quite the opportunity you were looking for? Why not check out our selection of top 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.