Wed. Jul 24th, 2024

TLDR:

  • Solomon Technology (TWSE:2359) is increasing its dividend to NT$1.70, a 13% increase over last year’s payment.
  • The dividend yield for the company will be 3.7%, which is typical for the industry.

In a recent announcement, the board of Solomon Technology Corporation (TWSE:2359) revealed that the dividend for the upcoming period will be NT$1.70, marking a 13% increase from the previous year’s payment of NT$1.50. While the dividend yield of 3.7% falls in line with industry standards, there are some key factors to consider.

One of the primary concerns is the earnings coverage of the dividend. While the last payment was covered by earnings, it represented 204% of cash flows, indicating a focus on returning cash to shareholders. This approach could leave the dividend vulnerable to future cuts, despite an expected EPS growth of 30.5% over the next year.

Looking back at Solomon Technology’s dividend history, there has been inconsistency in payments over the years, with a compound annual growth rate (CAGR) of approximately 4.6%. This lack of stability raises doubts about the company’s long-term dividend prospects and overall shareholder return.

However, the company has shown promising earnings growth, with a 31% increase in earnings per share over the past five years. This growth, coupled with a balanced approach to reinvesting and paying dividends, suggests a potential for stronger dividends in the future.

Despite the dividend increase, some caution is advised for income investors. With cash flows lacking, sustaining the dividend payment may prove challenging for Solomon Technology. Investors should consider a company’s dividend policy and look for consistency as a sign of financial stability.

For a more comprehensive analysis, investors can review Solomon Technology’s valuation, risks, insider transactions, and financial health. While the dividend increase is positive news, it’s essential to assess the company’s overall financial standing before making investment decisions.