Kindom Development (TWSE:2520) Will Pay A Larger Dividend Than Last Year At 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. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

See our latest analysis for Kindom Development

Kindom Development's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. 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. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 31.6% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was NT$0.909, compared to the most recent full-year payment of NT$1.80. This means that it has been growing its distributions at 7.1% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Kindom Development's Dividend

Overall, we always like to see the dividend being raised, but we don't think Kindom Development will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Kindom Development is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Kindom Development 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.

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