Qualipoly Chemical's (TWSE:4722) Dividend Is Being Reduced To NT$1.00

Qualipoly Chemical Corp. (TWSE:4722) has announced that on 11th of July, it will be paying a dividend ofNT$1.00, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 2.4%, which only provides a modest boost to overall returns.

Check out our latest analysis for Qualipoly Chemical

Qualipoly Chemical's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Qualipoly Chemical's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Unless the company can turn things around, EPS could fall by 2.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 46%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was NT$1.14 in 2014, and the most recent fiscal year payment was NT$1.00. This works out to be a decline of approximately 1.3% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Qualipoly Chemical has seen earnings per share falling at 2.1% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Qualipoly Chemical's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 2 warning signs for Qualipoly Chemical (1 makes us a bit uncomfortable!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.