Radiant Opto-Electronics (TWSE:6176) Is Due To Pay A Dividend Of NT$10.00

Radiant Opto-Electronics Corporation's (TWSE:6176) investors are due to receive a payment of NT$10.00 per share on 19th of July. The dividend yield will be 4.6% based on this payment which is still above the industry average.

View our latest analysis for Radiant Opto-Electronics

Radiant Opto-Electronics Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Radiant Opto-Electronics was paying out 72% of earnings, but a comparatively small 69% 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.

Looking forward, earnings per share is forecast to fall by 40.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 127%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of NT$7.00 in 2014 to the most recent total annual payment of NT$10.00. This means that it has been growing its distributions at 3.6% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Radiant Opto-Electronics May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Radiant Opto-Electronics' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Radiant Opto-Electronics' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Radiant Opto-Electronics (1 is a bit concerning!) 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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