Visual Photonics Epitaxy (TWSE:2455) Has Announced That Its Dividend Will Be Reduced To NT$2.20

Visual Photonics Epitaxy Co., Ltd. (TWSE:2455) has announced that on 12th of July, it will be paying a dividend ofNT$2.20, which a reduction from last year's comparable dividend. This means that the dividend yield is 1.6%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Visual Photonics Epitaxy

Visual Photonics Epitaxy's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Visual Photonics Epitaxy's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 99.8%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was NT$2.67 in 2014, and the most recent fiscal year payment was NT$2.20. Doing the maths, this is a decline of about 1.9% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Visual Photonics Epitaxy has impressed us by growing EPS at 11% 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.

Visual Photonics Epitaxy Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Visual Photonics Epitaxy has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 Visual Photonics Epitaxy analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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