Macronix International's (TWSE:2337) Dividend Will Be Reduced To NT$0.50

Macronix International Co., Ltd.'s (TWSE:2337) dividend is being reduced from last year's payment covering the same period to NT$0.50 on the 29th of July. Based on this payment, the dividend yield will be 1.9%, which is lower than the average for the industry.

Check out our latest analysis for Macronix International

Macronix International Is Paying Out More Than It Is Earning

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Even in the absence of profits, Macronix International is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

The next 12 months is set to see EPS grow by 108.0%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Macronix International's Dividend Has Lacked Consistency

It's comforting to see that Macronix International has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 6 years was NT$0.98 in 2018, and the most recent fiscal year payment was NT$0.50. The dividend has fallen 49% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Is Doubtful

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Macronix International has seen earnings per share falling at 7.6% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Macronix International's Dividend Doesn't Look Great

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

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 instance, we've picked out 1 warning sign for Macronix International that investors should take into consideration. 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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