Farglory Land Development (TWSE:5522) Has Affirmed Its Dividend Of NT$1.00

The board of Farglory Land Development Co., Ltd. (TWSE:5522) has announced that it will pay a dividend of NT$1.00 per share on the 21st of November. This means the annual payment is 6.4% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Farglory Land Development

Farglory Land Development's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite comfortably covered by Farglory Land Development's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 84% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share could rise by 16.1% 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 61%, 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$3.50 in 2014, and the most recent fiscal year payment was NT$4.50. This works out to be a compound annual growth rate (CAGR) of approximately 2.5% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

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 Farglory Land Development has grown earnings per share at 16% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Farglory Land Development is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Farglory Land Development is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Farglory Land Development (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.