Apacer Technology (TWSE:8271) dividend will be reduced to NT$3.15

Apacer Technology Inc. (TWSE:8271) announced that it will reduce its dividend payable on July 25th to NT$3.15, which is 4.5% lower than what investors received last year in the same period. However, the 4.8% dividend yield is still a decent boost to shareholder returns.

See our latest analysis for Apacer Technology

Apacer Technology Earnings Easily Cover Distributions

A big dividend yield over a few years doesn’t mean much if it can’t be sustained. The last dividend represented a large portion of free cash flows, and this was compounded by the lack of free cash flows. This is a very unsustainable practice and can be risky if continued long term.

Over the next year, EPS could expand by 5.2% if recent trends continue. If the dividend continues on recent trends, we estimate the payout ratio will be 71%, which would make us comfortable with the sustainability of the dividend despite levels currently being quite high.

Dividend Volatility

The company’s dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the past 10 years was NT$2.38 in 2014, and the payment for the most recent fiscal year was NT$3.30. This implies that the company increased its distributions at an annual rate of about 3.3% during that period. It’s good to see modest dividend growth, but we think this is offset by historic payout cuts. It’s difficult to live on dividend income if the company’s profits aren’t consistent.

We could see Apacer Technology’s dividend growth

Rising earnings per share can be a mitigating factor when considering past fluctuations in dividends. It’s encouraging to see that Apacer Technology has grown its earnings per share at 5.2% per year over the last five years. The payout ratio is much higher, which could mean that the growth rate will slow down in the future, and this could also affect the dividend.

Apacer Technology’s dividend doesn’t look sustainable

Overall, it’s not good to see that the dividends have been cut, but this could be explained by the fact that payments were a bit high previously. The track record is not good and the payments are a little high to be considered sustainable. We would probably look elsewhere for an income investment.

Market movements attest to how much a consistent dividend policy is valued compared to a more unpredictable one. However, despite the importance of dividend payments, these are not the only factors our readers should know when evaluating a company. To this end, Apacer Technology 3 warning signs (and 1 that we don’t like very much) we think you should know. Is Apacer Technology not quite the opportunity you were looking for? Why not check out our selection of the main dividend stocks.

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