Stark Technology (TWSE:2480) Will Pay A Larger Dividend Than Last Year At NT$6.64

Stark Technology Inc. (TWSE:2480) will increase its dividend from last year's comparable payment on the 12th of July to NT$6.64. This takes the dividend yield to 5.2%, which shareholders will be pleased with.

See our latest analysis for Stark Technology

Stark Technology's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, Stark Technology was paying out a very large proportion of what it was earning and 110% 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.

Over the next year, EPS could expand by 13.2% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 89%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Stark Technology Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was NT$2.50, compared to the most recent full-year payment of NT$6.64. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Stark Technology Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Stark Technology has impressed us by growing EPS at 13% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Stark Technology's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Stark Technology that investors should know about before committing capital to this stock. 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.