Taiwan Pelican Express' (TWSE:2642) Dividend Is Being Reduced To NT$0.80

Taiwan Pelican Express Co., Ltd. (TWSE:2642) is reducing its dividend from last year's comparable payment to NT$0.80 on the 28th of June. This means that the annual payment is 2.1% of the current stock price, which is lower than what the rest of the industry is paying.

View our latest analysis for Taiwan Pelican Express

Taiwan Pelican Express' Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last payment made up 74% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share could rise by 3.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 72% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from NT$1.50 total annually to NT$0.80. Doing the maths, this is a decline of about 6.1% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Earnings have grown at around 3.6% a year for the past five years, which isn't massive but still better than seeing them shrink. Slow growth and a high payout ratio could mean that Taiwan Pelican Express has maxed out the amount that it has been able to pay to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Our Thoughts On Taiwan Pelican Express' Dividend

Overall, we think that Taiwan Pelican Express could make a reasonable income stock, even though it did cut the dividend this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Taiwan Pelican Express (1 is a bit unpleasant!) 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.