Lingsen Precision Industries (TWSE:2369) Will Pay A Dividend Of NT$0.30

The board of Lingsen Precision Industries, Ltd. (TWSE:2369) has announced that it will pay a dividend of NT$0.30 per share on the 28th of August. This means the annual payment will be 1.2% of the current stock price, which is lower than the industry average.

View our latest analysis for Lingsen Precision Industries

Lingsen Precision Industries' Distributions May Be Difficult To Sustain

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Lingsen Precision Industries is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Looking forward, earnings per share could rise by 36.6% over the next year if the trend from the last few years continues. It's nice to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was NT$0.71, compared to the most recent full-year payment of NT$0.30. Doing the maths, this is a decline of about 8.3% per year. 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.

The Company Could Face Some Challenges Growing The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Lingsen Precision Industries has impressed us by growing EPS at 37% per year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in Lingsen Precision Industries stock. Is Lingsen Precision Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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