BenQ Materials (TWSE:8215) Will Pay A Smaller Dividend Than Last Year

BenQ Materials Corporation (TWSE:8215) has announced that on 15th of August, it will be paying a dividend ofNT$1.20, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 3.5% will still be comparable to other companies in the industry.

View our latest analysis for BenQ Materials

BenQ Materials' Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Looking forward, earnings per share is forecast to rise by 55.7% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 66% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was NT$0.30, compared to the most recent full-year payment of NT$1.20. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

BenQ Materials May Have Challenges Growing 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. It's encouraging to see that BenQ Materials has been growing its earnings per share at 6.8% a year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

The Dividend Could Prove To Be Unreliable

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. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for BenQ Materials (2 make us uncomfortable!) 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.

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