Syscom Computer Engineering (TWSE:2453) Is Increasing Its Dividend To NT$2.40

Syscom Computer Engineering Co. (TWSE:2453) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of August to NT$2.40. The payment will take the dividend yield to 3.8%, which is in line with the average for the industry.

Check out our latest analysis for Syscom Computer Engineering

Syscom Computer Engineering's Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Syscom Computer Engineering's was paying out quite a large proportion of earnings and 78% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Over the next year, EPS could expand by 27.3% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 79% which is a bit high but can definitely be sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from NT$0.60 total annually to NT$2.40. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Syscom Computer Engineering has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Syscom Computer Engineering Might Find It Hard To Grow Its Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Syscom Computer Engineering has seen EPS rising for the last five years, at 27% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Syscom Computer Engineering is not retaining those earnings to reinvest in growth.

Our Thoughts On Syscom Computer Engineering's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Syscom Computer Engineering's payments are rock solid. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Syscom Computer Engineering is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Syscom Computer Engineering that investors should know about before committing capital to this stock. Is Syscom Computer Engineering not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.

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