Phoenix Silicon International (TWSE:8028) Is Paying Out A Dividend Of NT$1.80

Phoenix Silicon International Corporation's (TWSE:8028) investors are due to receive a payment of NT$1.80 per share on 10th of July. This means the dividend yield will be fairly typical at 2.8%.

See our latest analysis for Phoenix Silicon International

Phoenix Silicon International Is Paying Out More Than It Is Earning

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Phoenix Silicon International was paying out quite a large proportion of both earnings and cash flow, with the dividend being 216% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, EPS could fall by 0.3% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 101%, which is definitely a bit high to be sustainable going forward.

Phoenix Silicon International's Dividend Has Lacked Consistency

Looking back, Phoenix Silicon International's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of NT$0.89 in 2015 to the most recent total annual payment of NT$1.80. This works out to be a compound annual growth rate (CAGR) of approximately 8.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Phoenix Silicon International's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

An additional note is that the company has been raising capital by issuing stock equal to 13% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Phoenix Silicon International's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Phoenix Silicon International's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Phoenix Silicon International you should be aware of, and 1 of them makes us a bit uncomfortable. Is Phoenix Silicon International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.