EVA Airways (TWSE:2618) Has Announced That It Will Be Increasing Its Dividend To NT$1.80

EVA Airways Corp. (TWSE:2618) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of August to NT$1.80. This will take the dividend yield to an attractive 4.8%, providing a nice boost to shareholder returns.

View our latest analysis for EVA Airways

EVA Airways Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by EVA Airways' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 50.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 113%, which could put the dividend in jeopardy if the company's earnings don't improve.

EVA Airways' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the annual payment back then was NT$0.257, compared to the most recent full-year payment of NT$1.80. This implies that the company grew its distributions at a yearly rate of about 28% 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.

The Dividend Looks Likely To Grow

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. EVA Airways has seen EPS rising for the last five years, at 21% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

EVA Airways Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that EVA Airways is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.

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. To that end, EVA Airways has 2 warning signs (and 1 which is a bit concerning) we think you should know about. 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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