Waffer Technology Co., Ltd. (TWSE:6235) announced on April 26 that it will increase its dividend to NT$1.68 from last year's equivalent payment. Even though the dividend has increased, the yield is still quite low at 1.5%.
Check out our latest analysis for Waffer Technology.
Waffer Technology's earnings easily cover distributions
Even a low dividend yield can be attractive if it is predictable over the long term. Prior to making this announcement, Waffer Technology was generating enough revenue to cover its dividend, but was not generating free cash flow. A lack of cash flow can certainly make it difficult to return cash to shareholders, or at the very least means a strained balance sheet.
Looking ahead, we expect earnings per share to increase dramatically over the next year. Assuming that dividends continue in line with recent trends, he believes the dividend payout ratio will be 10%, and he is satisfied with the sustainability of the dividend.
Waffer Technology's dividend is inconsistent.
Looking back, Waffer Technology's dividend isn't all that stable. This makes us a little more cautious about dividend consistency across the economic cycle. Dividends totaled NT$1.68 in the latest annual payment, up from a total of NT$1.99 in 2017. This translates to a decline of approximately 2.4% per year over that time. Generally speaking, companies whose dividends decrease over time are not what we're looking for.
Dividends are likely to increase
Given that the dividend has been cut in the past, we need to see if earnings are growing, and if that could lead to dividend increases in the future. We're pleased to see that Waffer Technology has grown its earnings per share at 33% per year over the past five years. Despite returning a lot of capital to shareholders, the company has no problems growing, making it a very nice combination for a dividend stock.
Waffer Technology's philosophy on dividends
Overall, we always hope the dividend will be raised, but we don't think Waffer Technology will be a great income stock. Although Waffer Technology generates enough revenue to cover its payments, it lacks cash flow. If you care about income, Waffer Technology doesn't seem like a good stock to add to your portfolio.
It's important to note that companies with a consistent dividend policy generate greater investor confidence than companies with an erratic dividend policy. At the same time, there are other factors that readers should be aware of before pouring capital into stocks. I took the discussion a little further and found the following: 1 warning sign for Waffer Technology That means investors need to be conscious moving forward. Is Waffer Technology the opportunity you've been looking for? Why not check it out? Selection of high dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
