Swancor Holding (TWSE:3708) Is Increasing Its Dividend To NT$5.55

Swancor Holding Co., LTD. (TWSE:3708) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of July to NT$5.55. The payment will take the dividend yield to 4.1%, which is in line with the average for the industry.

See our latest analysis for Swancor Holding

Swancor Holding Is Paying Out More Than It Is Earning

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by Swancor Holding's earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 66.0% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 125%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of NT$1.91 in 2014 to the most recent total annual payment of NT$6.00. This means that it has been growing its distributions at 12% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Swancor Holding has seen EPS rising for the last five years, at 37% per annum. 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 Swancor Holding'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 generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Swancor Holding you should be aware of, and 1 of them doesn't sit too well with us. Is Swancor Holding 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.

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