Fullerton Technology's (TWSE:6136) Upcoming Dividend Will Be Larger Than Last Year's

The board of Fullerton Technology Co., Ltd. (TWSE:6136) has announced that it will be paying its dividend of NT$1.20 on the 31st of July, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.1%, which shareholders will be pleased with.

See our latest analysis for Fullerton Technology

Fullerton Technology Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 131% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share could rise by 5.2% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 114% over the next year.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from NT$1.85 total annually to NT$1.20. Doing the maths, this is a decline of about 4.2% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Fullerton Technology has been growing its earnings per share at 5.2% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Fullerton Technology's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Fullerton Technology will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 2 warning signs for Fullerton Technology (1 makes us a bit uncomfortable!) 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.

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