Sinher Technology (TWSE:4999) Has Announced That Its Dividend Will Be Reduced To NT$1.00

Sinher Technology Inc. (TWSE:4999) is reducing its dividend from last year's comparable payment to NT$1.00 on the 8th of August. Based on this payment, the dividend yield will be 2.8%, which is lower than the average for the industry.

View our latest analysis for Sinher Technology

Sinher Technology Is Paying Out More Than It Is Earning

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Sinher Technology was paying out quite a large proportion of both earnings and cash flow, with the dividend being 411% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, EPS could fall by 29.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 122%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from NT$1.82 total annually to NT$1.00. Doing the maths, this is a decline of about 5.8% per year. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Over the past five years, it looks as though Sinher Technology's EPS has declined at around 29% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Sinher Technology's Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Sinher Technology has 3 warning signs (and 2 which are significant) we think you should know about. Is Sinher Technology not quite the opportunity you were looking for? Why not check out our selection of top 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.

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