Ko Ja (Cayman)'s (TWSE:5215) Dividend Will Be Reduced To NT$1.50

Ko Ja (Cayman) Co., Ltd. (TWSE:5215) is reducing its dividend from last year's comparable payment to NT$1.50 on the 31st of July. This payment takes the dividend yield to 2.9%, which only provides a modest boost to overall returns.

View our latest analysis for Ko Ja (Cayman)

Ko Ja (Cayman)'s Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. The last payment was quite easily covered by earnings, but it made up 133% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to fall by 4.8% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 54%, which is definitely feasible to continue.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from NT$1.3 total annually to NT$1.50. This works out to be a compound annual growth rate (CAGR) of approximately 1.4% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Ko Ja (Cayman) May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Ko Ja (Cayman) has seen earnings per share falling at 4.8% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Ko Ja (Cayman)'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. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Ko Ja (Cayman) (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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