Founding Construction Development (TWSE:5533) Has Affirmed Its Dividend Of NT$1.20

The board of Founding Construction Development Corp. (TWSE:5533) has announced that it will pay a dividend on the 2nd of August, with investors receiving NT$1.20 per share. The dividend yield will be 5.0% based on this payment which is still above the industry average.

View our latest analysis for Founding Construction Development

Founding Construction Development's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Founding Construction Development was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

If the trend of the last few years continues, EPS will grow by 25.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was NT$0.428, compared to the most recent full-year payment of NT$1.20. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Founding Construction Development has grown earnings per share at 26% per year over the past five years. Founding Construction Development is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Founding Construction Development Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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 Founding Construction Development that you should be aware of before investing. Is Founding Construction Development not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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