ShunSin Technology Holdings (TWSE:6451) Is Paying Out A Larger Dividend Than Last Year

ShunSin Technology Holdings Limited (TWSE:6451) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of August to NT$2.46. Despite this raise, the dividend yield of 1.1% is only a modest boost to shareholder 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 ShunSin Technology Holdings' stock price has increased by 55% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for ShunSin Technology Holdings

ShunSin Technology Holdings' 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. Before this announcement, ShunSin Technology Holdings was paying out 89% of earnings, but a comparatively small 41% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, could fall by 7.1% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 86% in the next 12 months which is on the higher end of the range we would say is sustainable.

ShunSin Technology Holdings' Dividend Has Lacked Consistency

ShunSin Technology Holdings has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was NT$7.50 in 2015, and the most recent fiscal year payment was NT$2.46. This works out to a decline of approximately 67% over that time. 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, ShunSin Technology Holdings' earnings per share has shrunk at approximately 7.1% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for ShunSin Technology Holdings you should be aware of, and 2 of them don't sit too well with us. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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