VIA Labs (TWSE:6756) Has Announced That Its Dividend Will Be Reduced To NT$1.8

VIA Labs, Inc. (TWSE:6756) is reducing its dividend to NT$1.8 on the 22nd of Maywhich is 9.9% less than last year's comparable payment of NT$2. Based on this payment, the dividend yield will be 1.9%, which is lower than the average for the industry.

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VIA Labs' Projections Indicate Future Payments May Be Unsustainable

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, the company was paying out 98% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 49%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, EPS could fall by 11.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 101%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for VIA Labs

VIA Labs' Dividend Has Lacked Consistency

VIA Labs has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2020, the annual payment back then was NT$3.30, compared to the most recent full-year payment of NT$2. The dividend has shrunk at around 9.5% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though VIA Labs' EPS has declined at around 11% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

VIA Labs' Dividend Doesn't Look Sustainable

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. We don't think VIA Labs is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for VIA Labs (1 can'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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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.