Kindom Development (TWSE:2520) Has Announced That It Will Be Increasing Its Dividend To NT$1.80

Kindom Development Co., Ltd. (TWSE:2520) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of August to NT$1.80. Although the dividend is now higher, the yield is only 2.7%, which is below the industry average.

Check out our latest analysis for Kindom Development

Kindom Development's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Kindom Development was paying only paying out a fraction of earnings, but the payment was a massive 100% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share could rise by 31.6% 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 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was NT$0.909 in 2014, and the most recent fiscal year payment was NT$1.80. This means that it has been growing its distributions at 7.1% per annum 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. Kindom Development 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. It's encouraging to see that Kindom Development has been growing its earnings per share at 32% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Kindom Development's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Kindom Development's payments are rock solid. While Kindom Development is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Kindom Development that investors should know about before committing capital to this stock. 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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