ChipMOS TECHNOLOGIES' (TWSE:8150) Dividend Is Being Reduced To NT$1.80

ChipMOS TECHNOLOGIES INC. (TWSE:8150) has announced that on 19th of July, it will be paying a dividend ofNT$1.80, which a reduction from last year's comparable dividend. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

See our latest analysis for ChipMOS TECHNOLOGIES

ChipMOS TECHNOLOGIES' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, ChipMOS TECHNOLOGIES was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 34.0%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

ChipMOS TECHNOLOGIES' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the dividend has gone from NT$2.61 total annually to NT$1.80. Doing the maths, this is a decline of about 4.1% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

We Could See ChipMOS TECHNOLOGIES' Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that ChipMOS TECHNOLOGIES has been growing its earnings per share at 9.5% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like ChipMOS TECHNOLOGIES' Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that ChipMOS TECHNOLOGIES has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for ChipMOS TECHNOLOGIES that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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