Catcher Technology (TWSE:2474) Has Announced That It Will Be Increasing Its Dividend To NT$7.50

Catcher Technology Co., Ltd. (TWSE:2474) will increase its dividend from last year's comparable payment on the 8th of January to NT$7.50. This makes the dividend yield 6.8%, which is above the industry average.

See our latest analysis for Catcher Technology

Catcher Technology's Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the dividend made up 97% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Over the next year, EPS is forecast to fall by 6.7%. If the dividend continues along recent trends, we estimate the payout ratio could reach 110%, which could put the dividend in jeopardy if the company's earnings don't improve.

Catcher Technology Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of NT$5.00 in 2014 to the most recent total annual payment of NT$15.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. It's not great to see that Catcher Technology's earnings per share has fallen at approximately 7.7% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Catcher Technology's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Catcher Technology will make a great income stock. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Catcher Technology that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.