Taiwan Pelican Express (TWSE:2642) Will Pay A Smaller Dividend Than Last Year

Taiwan Pelican Express Co., Ltd. (TWSE:2642) has announced that on 28th of June, it will be paying a dividend ofNT$0.80, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 2.1%, which only provides a modest boost to overall returns.

Check out our latest analysis for Taiwan Pelican Express

Taiwan Pelican Express' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before this announcement, Taiwan Pelican Express was paying out 70% of earnings, but a comparatively small 27% of free cash flows. 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

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from NT$1.50 total annually to NT$0.80. This works out to be a decline of approximately 6.1% per year over that time. 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

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. However, Taiwan Pelican Express has only grown its earnings per share at 3.6% per annum over the past five years. Taiwan Pelican Express' earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Taiwan Pelican Express you should be aware of, and 1 of them makes us a bit uncomfortable. Is Taiwan Pelican Express not quite the opportunity you were looking for? Why not check out our selection of top 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.