Taitron Components (NASDAQ:TAIT) Has Announced A Dividend Of $0.05

Taitron Components Incorporated (NASDAQ:TAIT) has announced that it will pay a dividend of $0.05 per share on the 27th of November. This makes the dividend yield 7.0%, which will augment investor returns quite nicely.

See our latest analysis for Taitron Components

Taitron Components' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Taitron Components was paying out quite a large proportion of both earnings and cash flow, with the dividend being 97% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Earnings per share could rise by 0.9% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 90% which is a bit high but can definitely be sustainable.

Taitron Components Doesn't Have A Long Payment History

It is great to see that Taitron Components has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the dividend has gone from $0.10 total annually to $0.20. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

Taitron Components May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, Taitron Components' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Slow growth and a high payout ratio could mean that Taitron Components 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.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

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. As an example, we've identified 4 warning signs for Taitron Components 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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