Sheng Yu Steel's (TWSE:2029) Upcoming Dividend Will Be Larger Than Last Year's

Sheng Yu Steel Co., Ltd. (TWSE:2029) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of August to NT$1.25. This takes the annual payment to 4.5% of the current stock price, which is about average for the industry.

View our latest analysis for Sheng Yu Steel

Sheng Yu Steel'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. The last dividend was quite easily covered by Sheng Yu Steel's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 59.2% 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 41% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was NT$1.15, compared to the most recent full-year payment of NT$1.25. Dividend payments have grown at less than 1% a year over this period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

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. It's encouraging to see that Sheng Yu Steel has been growing its earnings per share at 59% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

We Really Like Sheng Yu Steel's Dividend

Overall, a dividend increase is always good, and we think that Sheng Yu Steel is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Sheng Yu Steel that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.