Chin-Poon Industrial's (TWSE:2355) Upcoming Dividend Will Be Larger Than Last Year's

Chin-Poon Industrial Co., Ltd. (TWSE:2355) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of August to NT$1.25. Although the dividend is now higher, the yield is only 2.6%, which is below the industry average.

View our latest analysis for Chin-Poon Industrial

Chin-Poon Industrial's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. The last dividend was quite easily covered by Chin-Poon Industrial's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 15.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was NT$2.20, compared to the most recent full-year payment of NT$1.25. Doing the maths, this is a decline of about 5.5% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Chin-Poon Industrial has been growing its earnings per share at 94% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Chin-Poon Industrial could prove to be a strong dividend payer.

We Really Like Chin-Poon Industrial's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Chin-Poon Industrial that investors should know about before committing capital to this stock. Is Chin-Poon Industrial 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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