Chang Wah Electromaterials (TWSE:8070) Has Announced A Dividend Of NT$0.7003

The board of Chang Wah Electromaterials Inc. (TWSE:8070) has announced that it will pay a dividend on the 17th of January, with investors receiving NT$0.7003 per share. This takes the annual payment to 4.0% of the current stock price, which is about average for the industry.

View our latest analysis for Chang Wah Electromaterials

Chang Wah Electromaterials' Projections Indicate Future Payments May Be Unsustainable

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Chang Wah Electromaterials' dividend was higher than its profits, but the free cash flows quite comfortably covered it. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to grow by 2.2% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 149%, which probably can't continue without starting to put some pressure on the balance sheet.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of NT$0.324 in 2014 to the most recent total annual payment of NT$2.16. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Chang Wah Electromaterials May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings have grown at around 2.2% a year for the past five years, which isn't massive but still better than seeing them shrink. So the company has struggled to grow its EPS yet it's still paying out 107% of its earnings. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

Our Thoughts On Chang Wah Electromaterials' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Chang Wah Electromaterials' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Chang Wah Electromaterials that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.