Nan Pao Resins Chemical's (TWSE:4766) Upcoming Dividend Will Be Larger Than Last Year's

Nan Pao Resins Chemical Co., Ltd.'s (TWSE:4766) dividend will be increasing from last year's payment of the same period to NT$15.00 on 19th of July. This makes the dividend yield about the same as the industry average at 3.9%.

Check out our latest analysis for Nan Pao Resins Chemical

Nan Pao Resins Chemical'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. Before this announcement, Nan Pao Resins Chemical was paying out 75% of earnings, but a comparatively small 63% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS could expand by 25.7% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

Nan Pao Resins Chemical Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 6 years was NT$5.00 in 2018, and the most recent fiscal year payment was NT$15.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Nan Pao Resins Chemical has impressed us by growing EPS at 26% per year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

Nan Pao Resins Chemical Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Nan Pao Resins Chemical that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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