Loop Telecommunication InternationalInc's (TWSE:3025) Dividend Will Be Increased To NT$3.20

Loop Telecommunication International,Inc.'s (TWSE:3025) dividend will be increasing from last year's payment of the same period to NT$3.20 on 20th of September. This takes the dividend yield to 5.2%, which shareholders will be pleased with.

Check out our latest analysis for Loop Telecommunication InternationalInc

Loop Telecommunication InternationalInc's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the dividend made up 87% of cash flows, but a higher proportion of net income. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Earnings per share could rise by 110.0% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 91%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from NT$0.30 total annually to NT$3.20. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Loop Telecommunication InternationalInc's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Loop Telecommunication InternationalInc has seen EPS rising for the last five years, at 110% per annum. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Strong earnings growth means Loop Telecommunication InternationalInc has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Loop Telecommunication InternationalInc 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.