Machvision (TWSE:3563) Will Pay A Dividend Of NT$6.00

Machvision Inc.'s (TWSE:3563) investors are due to receive a payment of NT$6.00 per share on 12th of July. This means that the dividend yield is 1.9%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for Machvision

Machvision Doesn't Earn Enough To Cover Its Payments

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

If the company can't turn things around, EPS could fall by 30.6% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 217%, which is definitely a bit high to be sustainable going forward.

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. The annual payment during the last 10 years was NT$2.50 in 2014, and the most recent fiscal year payment was NT$7.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 31% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

We should note that Machvision has issued stock equal to 30% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

We're Not Big Fans Of Machvision's Dividend

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the 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 identified 4 warning signs for Machvision (3 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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