Bright LED Electronics (TWSE:3031) Is Paying Out Less In Dividends Than Last Year

Bright LED Electronics Corp. (TWSE:3031) is reducing its dividend from last year's comparable payment to NT$0.80 on the 14th of August. This means that the annual payment will be 3.5% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Bright LED Electronics

Bright LED Electronics' Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. At the time of the last dividend payment, Bright LED Electronics was paying out a very large proportion of what it was earning and 109% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

EPS is set to grow by 11.9% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 78% which is a bit high but can definitely be sustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was NT$0.35 in 2014, and the most recent fiscal year payment was NT$0.80. This implies that the company grew its distributions at a yearly rate of about 8.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Bright LED Electronics might have put its house in order since then, but we remain cautious.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Bright LED Electronics has impressed us by growing EPS at 12% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Bright LED Electronics' Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. Strong earnings growth means Bright LED Electronics has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Bright LED Electronics that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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