Weblink International's (TWSE:6776) Dividend Will Be Reduced To NT$3.00

Weblink International Inc. (TWSE:6776) is reducing its dividend to NT$3.00 on the 29th of Julywhich is 14% less than last year's comparable payment of NT$3.50. The dividend yield of 6.1% is still a nice boost to shareholder returns, despite the cut.

See our latest analysis for Weblink International

Weblink International's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Weblink International's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. Generally, we think that this would be a risky long term practice.

Over the next year, EPS could expand by 26.0% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 62% which brings it into quite a comfortable range.

Weblink International Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the annual payment back then was NT$2.00, compared to the most recent full-year payment of NT$3.50. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Weblink International has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth Could Be Constrained

Investors could be attracted to the stock based on the quality of its payment history. Weblink International has seen EPS rising for the last five years, at 26% per annum. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

Weblink International'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. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Weblink International (2 don't sit too well with us!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.