eCloudvalley Digital Technology (TWSE:6689) cuts dividend to NT$2.00

eCloudvalley Digital Technology Co., Ltd. (TWSE:6689) announced that it will pay a dividend of NT$2.00 on August 21, down from the equivalent dividend paid last year. The payment gives it a dividend yield of 1.7%, only slightly boosting its overall earnings.

View our latest analysis on eCloudvalley Digital Technology

eCloudvalley Digital Technology’s dividend is well covered by profits

While a higher yield is good, we also need to see if higher levels of dividend payments are sustainable. Prior to this announcement, eCloudvalley Digital Technology’s dividend was a very large percentage of its profits, but perhaps more concerning is that it was 149% of its cash flow. Paying out such a high percentage of its cash flow could mean the company is forced to cut the dividend if the business experiences any difficulties.

EPS is expected to grow 17.6% over the next year. If the dividend continues along recent trends, we expect the payout ratio to reach 79%, which is high but still achievable.

eCloudvalley Digital Technology’s dividends are inconsistent

eCloudvalley Digital Technology has been paying dividends for a while, but the track record isn’t that great. This suggests that the dividends may not be the most reliable. Dividends have increased from an annual total of NT$1.16 in 2019 to a latest annual total of NT$2.00. This means that the company has increased its dividends by about 12% per year over this period. Dividends have grown rapidly during this time, but they have been cut in the past, and it’s unclear whether this stock will be a reliable source of income in the future.

eCloudvalley Digital Technology could grow dividends

With a relatively unstable dividend, it’s even more important to evaluate whether earnings per share are growing, which could suggest future dividend increases. eCloudvalley Digital Technology surprised us by growing EPS at 5.3% per year over the last five years. The company has been able to grow its earnings at a decent rate recently, but with a high payout ratio, we don’t think the prospects for dividend growth are very high.

Our thoughts on eCloudvalley Digital Technology’s dividend

In summary, while it’s not ideal to see the dividend cut, the company could lower the dividend to a more sustainable range. Although eCloudvalley Digital Technology makes enough profit to cover its dividend, it lacks cash flow. The company is not in the top tier of income-generating stocks.

It is important to note that a company with a consistent dividend policy will likely gain more investor confidence than one with an erratic dividend policy. Still, investors should consider many factors beyond dividend payments when analysing a company. For example, we have identified the following factors: 2 warning signs for eCloudvalley Digital Technology (Number 1 is a bit worrying!) Here’s some information you should know before investing. If you’re a dividend investor, A carefully selected list of high dividend stocks.

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

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