Stock Analysis

Quanta Computer (TWSE:2382) Will Pay A Larger Dividend Than Last Year At NT$9.00

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Quanta Computer Inc. (TWSE:2382) will increase its dividend from last year's comparable payment on the 17th of May to NT$9.00. Based on this payment, the dividend yield for the company will be 3.1%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Quanta Computer's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Quanta Computer

Quanta Computer's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Quanta Computer's dividend made up quite a large proportion of earnings but only 30% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 85.5% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 50% which brings it into quite a comfortable range.

TWSE:2382 Historic Dividend April 1st 2024

Quanta Computer Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from NT$4.00 total annually to NT$9.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. Quanta Computer has seen EPS rising for the last five years, at 21% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Quanta Computer hasn't been doing.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend is easily covered by cash flows and has a good track record, but we think the payout ratio might be a bit high. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Quanta Computer that investors need to be conscious of moving forward. 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.