Tsann Kuen EnterpriseLtd (TWSE:2430) Will Pay A Smaller Dividend Than Last Year

Tsann Kuen Enterprise Co.,Ltd (TWSE:2430) has announced it will be reducing its dividend payable on the 23rd of April to NT$1.50, which is 32% lower than what investors received last year for the same period. This means the annual payment is 7.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Tsann Kuen EnterpriseLtd

Tsann Kuen EnterpriseLtd's Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Tsann Kuen EnterpriseLtd's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS could expand by 2.4% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 100%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from NT$2.85 total annually to NT$2.20. Doing the maths, this is a decline of about 2.6% per year. A company that decreases its dividend over time generally isn't what we are looking for.

Tsann Kuen EnterpriseLtd May Find It Hard To Grow The Dividend

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. Earnings have grown at around 2.4% a year for the past five years, which isn't massive but still better than seeing them shrink. So the company has struggled to grow its EPS yet it's still paying out 139% of its earnings. This gives limited room for the company to raise the dividend in the future.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Tsann Kuen EnterpriseLtd is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Tsann Kuen EnterpriseLtd that you should be aware of before investing. Is Tsann Kuen EnterpriseLtd not quite the opportunity you were looking for? Why not check out our selection of top 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.