Arizon RFID Technology (Cayman) (TWSE:6863) Is Increasing Its Dividend To NT$3.00

Arizon RFID Technology (Cayman) Co., Ltd.'s (TWSE:6863) dividend will be increasing from last year's payment of the same period to NT$3.00 on 29th of August. This takes the annual payment to 1.3% of the current stock price, which unfortunately is below what the industry is paying.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Arizon RFID Technology (Cayman)'s stock price has increased by 62% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Arizon RFID Technology (Cayman)

Arizon RFID Technology (Cayman)'s Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Arizon RFID Technology (Cayman)'s earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 41.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Arizon RFID Technology (Cayman) Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 2.6% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 2.6% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Arizon RFID Technology (Cayman)'s Dividend

Overall, we always like to see the dividend being raised, but we don't think Arizon RFID Technology (Cayman) will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Arizon RFID Technology (Cayman) is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Arizon RFID Technology (Cayman) that investors should know about before committing capital to this stock. 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.

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