eCloudvalley Digital Technology (TWSE:6689) Is Reducing Its Dividend To NT$2.00

eCloudvalley Digital Technology Co., Ltd. (TWSE:6689) has announced that on 21st of August, it will be paying a dividend ofNT$2.00, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 1.7%, which only provides a modest boost to overall returns.

View our latest analysis for eCloudvalley Digital Technology

eCloudvalley Digital Technology's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, eCloudvalley Digital Technology's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 149% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 17.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 79%, which is on the higher side, but certainly still feasible.

eCloudvalley Digital Technology's Dividend Has Lacked Consistency

eCloudvalley Digital Technology 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 dividend has gone from an annual total of NT$1.16 in 2019 to the most recent total annual payment of NT$2.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

eCloudvalley Digital Technology Could Grow Its Dividend

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. eCloudvalley Digital Technology has impressed us by growing EPS at 5.3% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On eCloudvalley Digital Technology's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While eCloudvalley Digital Technology is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. For example, we've identified 2 warning signs for eCloudvalley Digital Technology (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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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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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