YC InoxLtd (TWSE:2034) Has Announced That Its Dividend Will Be Reduced To NT$1.00

YC Inox Co.,Ltd (TWSE:2034) has announced that on 23rd of August, it will be paying a dividend ofNT$1.00, which a reduction from last year's comparable dividend. This means that the annual payment will be 3.9% of the current stock price, which is in line with the average for the industry.

View our latest analysis for YC InoxLtd

YC InoxLtd Might Find It Hard To Continue The Dividend

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. YC InoxLtd isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.

Recent, EPS has fallen by 21.2%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from NT$0.636 total annually to NT$1.00. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 21% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of YC InoxLtd's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. 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. We don't think that this is a great candidate to be 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for YC InoxLtd (of which 3 shouldn't be ignored!) you should know about. Is YC InoxLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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