Wiwynn's (TWSE:6669) Dividend Will Be Reduced To NT$42.00

Wiwynn Corporation (TWSE:6669) has announced it will be reducing its dividend payable on the 10th of July to NT$42.00, which is 16% lower than what investors received last year for the same period. This means that the annual payment is 1.8% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Wiwynn

Wiwynn's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Wiwynn's dividend made up quite a large proportion of earnings but only 48% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, earnings per share is forecast to rise by 117.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

Wiwynn Doesn't Have A Long Payment History

It is great to see that Wiwynn has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 6 years was NT$3.36 in 2018, and the most recent fiscal year payment was NT$50.00. This works out to be a compound annual growth rate (CAGR) of approximately 57% a year 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. We are encouraged to see that Wiwynn has grown earnings per share at 15% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Wiwynn Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Wiwynn has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Wiwynn that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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