Yem Chio (TWSE:4306) Is Due To Pay A Dividend Of NT$0.9807

Yem Chio Co., Ltd.'s (TWSE:4306) investors are due to receive a payment of NT$0.9807 per share on 9th of August. Based on this payment, the dividend yield will be 4.8%, which is fairly typical for the industry.

See our latest analysis for Yem Chio

Yem Chio's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Yem Chio was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share could rise by 29.6% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 60%, which is in the range that makes us comfortable with the sustainability of the dividend.

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$0.42, compared to the most recent full-year payment of NT$1.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Yem Chio might have put its house in order since then, but we remain cautious.

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. We are encouraged to see that Yem Chio has grown earnings per share at 30% per 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.

Our Thoughts On Yem Chio's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Yem Chio you should be aware of, and 1 of them shouldn't be ignored. 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.

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