Taitron Components' (NASDAQ:TAIT) Dividend Is Being Reduced To $0.035

Taitron Components Incorporated (NASDAQ:TAIT) is reducing its dividend to $0.035 on the 29th of Augustwhich is 30% less than last year's comparable payment of $0.05. This means the annual payment is 9.4% of the current stock price, which is above the average for the industry.

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Estimates Indicate Taitron Components' Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Looking forward, EPS could fall by 38.2% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 3,163%, which is definitely a bit high to be sustainable going forward.

View our latest analysis for Taitron Components

Taitron Components Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of $0.10 in 2016 to the most recent total annual payment of $0.20. This means that it has been growing its distributions at 8.0% per annum over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Taitron Components' EPS has fallen by approximately 38% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

We're Not Big Fans Of Taitron Components' Dividend

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 5 warning signs for Taitron Components (2 are significant!) that you should be aware of before investing. Is Taitron Components not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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