Compeq Manufacturing's (TWSE:2313) Upcoming Dividend Will Be Larger Than Last Year's

Compeq Manufacturing Co., Ltd. (TWSE:2313) has announced that it will be increasing its periodic dividend on the 27th of June to NT$2.40, which will be 60% higher than last year's comparable payment amount of NT$1.50. This takes the annual payment to 2.3% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Compeq Manufacturing

Compeq Manufacturing's Payment Could Potentially Have Solid Earnings Coverage

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, Compeq Manufacturing was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 17.6%. If the dividend continues on this path, the payout ratio could be 50% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of NT$0.50 in 2015 to the most recent total annual payment of NT$1.50. This means that it has been growing its distributions at 12% per annum over that time. 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.

The Dividend Looks Likely To Grow

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. Compeq Manufacturing has impressed us by growing EPS at 14% per year over the past five years. Compeq Manufacturing definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Compeq Manufacturing Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Compeq Manufacturing is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Compeq Manufacturing that investors should take into consideration. Is Compeq Manufacturing 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.