Dynamic Holding (TWSE:3715) Is Increasing Its Dividend To NT$1.50

Dynamic Holding Co., Ltd.'s (TWSE:3715) dividend will be increasing from last year's payment of the same period to NT$1.50 on 8th of August. Even though the dividend went up, the yield is still quite low at only 2.4%.

Check out our latest analysis for Dynamic Holding

Dynamic Holding's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Dynamic Holding's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 8.5%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Dynamic Holding Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. Since 2021, the annual payment back then was NT$0.40, compared to the most recent full-year payment of NT$1.50. This means that it has been growing its distributions at 55% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Dynamic Holding has been growing its earnings per share at 26% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Dynamic Holding's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Dynamic Holding's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 3 warning signs for Dynamic Holding 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.

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