eCloudvalley Digital Technology's (TWSE:6689) Dividend Will Be Reduced To NT$2.00

eCloudvalley Digital Technology Co., Ltd.'s (TWSE:6689) dividend is being reduced from last year's payment covering the same period to NT$2.00 on the 21st of August. This means that the dividend yield is 1.8%, which is a bit low when comparing to other companies in the industry.

Check out 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. Before making this announcement, eCloudvalley Digital Technology was paying out quite a large proportion of both earnings and cash flow, with the dividend being 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

Looking back, eCloudvalley Digital Technology's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from NT$1.16 total annually to NT$2.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has Growth Potential

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. We are encouraged to see that eCloudvalley Digital Technology has grown earnings per share at 5.3% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On eCloudvalley Digital Technology's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While eCloudvalley Digital Technology is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, eCloudvalley Digital Technology has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is eCloudvalley Digital Technology not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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