Generalplus Technology (TWSE:4952) Is Reducing Its Dividend To NT$1.30

Generalplus Technology Inc. (TWSE:4952) has announced that on 25th of July, it will be paying a dividend ofNT$1.30, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 1.9%, which only provides a modest boost to overall returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Generalplus Technology's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Generalplus Technology

Generalplus Technology's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Generalplus Technology's dividend made up quite a large proportion of earnings but only 28% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

If the company can't turn things around, EPS could fall by 5.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 81%, which is definitely on the higher side.

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 dividend has gone from an annual total of NT$2.50 in 2014 to the most recent total annual payment of NT$1.30. The dividend has shrunk at around 6.3% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Come By

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. In the last five years, Generalplus Technology's earnings per share has shrunk at approximately 5.9% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Generalplus Technology's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Generalplus Technology that investors should take into consideration. Is Generalplus Technology not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.