Yang Ming Marine Transport (TWSE:2609) Will Pay A Smaller Dividend Than Last Year

Yang Ming Marine Transport Corporation (TWSE:2609) is reducing its dividend from last year's comparable payment to NT$2.00 on the 31st of July. Based on this payment, the dividend yield will be 2.7%, which is lower than the average for the industry.

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 Yang Ming Marine Transport's stock price has increased by 53% 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 Yang Ming Marine Transport

Yang Ming Marine Transport Is Paying Out More Than It Is Earning

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Yang Ming Marine Transport was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to fall by 75.2% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach over 200%, which could put the dividend under pressure if earnings don't start to improve.

Yang Ming Marine Transport's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 2 years was NT$20.00 in 2022, and the most recent fiscal year payment was NT$2.00. As we can see, dividend payments have fallen heavily from where they were 2 years ago. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Yang Ming Marine Transport has impressed us by growing EPS at 33% per year over the past five years. Yang Ming Marine Transport is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Yang Ming Marine Transport's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Yang Ming Marine Transport is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Yang Ming Marine Transport has 5 warning signs (and 2 which are potentially serious) we think you should know about. 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.