The enticing mixture that Lih Tai Building Enterprise Co., Ltd. may give (GTSM: 5520) a spot in your dividend portfolio

Lih Tai Building Enterprise Co., Ltd. (GTSM: 5520) may it’s an attention-grabbing dividend share to carry for the long run? Buyers are sometimes drawn to sturdy corporations with the concept of ​​reinvesting dividends. In the event you’re hoping to reside off dividend revenue, it is vital to be lots stricter along with your investments than the typical bettor.

Excessive yield and a protracted historical past of dividends are a horny mixture for Lih Tai Building Enterprise. It would not be a shock to search out out that many buyers are shopping for it for dividends. The corporate additionally repurchased shares through the yr, representing round 3.6% of its market capitalization on the time. A easy evaluation can provide a number of data when shopping for a enterprise for its dividend, and we’ll go over it under.

Click on on the interactive chart for our full dividend evaluation

GTSM: Historic dividend 5520 February 26, 2021

Payout ratios

Dividends are typically paid out of the corporate’s earnings. If an organization pays extra dividends than it has earned, then the dividend might grow to be unsustainable – this isn’t an excellent state of affairs. Subsequently, we must always all the time test whether or not an organization can afford its dividend, measured as a proportion of an organization’s internet revenue after tax. Lih Tai Building Enterprise has paid out 44% of its earnings within the type of dividends over the previous twelve months. That is a median payout degree that leaves sufficient capital within the enterprise to fund any alternatives which will come up, whereas additionally rewarding shareholders. As well as, it’s potential to extend the payout ratio over time.

One other vital test that we do is to see if the free money stream generated is enough to pay the dividend. Of the free money stream generated final yr, Lih Tai Building Enterprise paid 48% as dividends, which means that the dividend is inexpensive. It’s optimistic to see that Lih Tai Building Enterprise’s dividend is roofed by each earnings and money stream, as that is normally an indication that the dividend is sustainable, and a decrease payout ratio normally suggests a larger margin of security earlier than the dividend is lowered.

With a robust internet money steadiness, buyers in Lih Tai Building Enterprise might not have to fret about dividends within the quick time period.

Make sure you get our newest evaluation on Lih Tai Building Enterprise’s monetary situation right here.

Dividend volatility

Earlier than shopping for a inventory for revenue, we need to see if dividends have been steady previously and if the corporate has a historical past of sustaining its dividend. For the needs of this text, we’re solely trying on the final decade of Lih Tai Building Enterprise dividend funds. The dividend has been lowered on at the least one event previously. Over the past 10-year interval, the primary annual fee was NT $ 1.8 in 2011, in comparison with NT $ 1.9 final yr. Dividend funds elevated by lower than 1% per yr throughout this era.

Modest dividend progress is sweet to see, however we consider that is offset by historic reductions in funds. It’s tough to reside on dividend revenue if the corporate’s earnings are usually not constant.

Potential for dividend progress

For the reason that dividend has been lowered previously, we have to test if the earnings are rising and if this might result in larger dividends sooner or later. The sturdy progress in earnings per share (EPS) may encourage our curiosity within the firm regardless of the fluctuating dividends, which is why it’s nice to see that Lih Tai Building Enterprise has elevated its earnings per share by 12% per yr over the course of over the previous 5 years. Earnings per share have grown at a very good tempo and the corporate pays lower than half of its earnings as dividends. We typically suppose that is a horny mixture, because it permits extra reinvestment within the enterprise.


To sum up, shareholders ought to all the time confirm that Lih Tai Building Enterprise’s dividends are inexpensive, that its dividend funds are comparatively steady, and that it has an honest outlook for its earnings and dividend progress. First, we like the truth that Lih Tai Building Enterprise has low and conservative payout ratios. We had been additionally completely happy to see its earnings enhance, nevertheless it was regarding that the dividend had been lowered at the least as soon as previously. All issues thought of, Lih Tai Building Enterprise seems to be like a strong prospect. On the precise evaluation, this could possibly be one thing particular.

You will need to word that corporations with a constant dividend coverage will generate larger investor confidence than these with an irregular coverage. Nonetheless, there are a bunch of different components that buyers want to contemplate, except for dividend funds, when analyzing a enterprise. For instance, we now have chosen 1 warning signal for Lih Tai Building Enterprise that buyers ought to know earlier than committing any capital to this inventory.

In search of extra excessive yield dividend concepts? Strive our listing of dividend paying shares with a yield above 3%.

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This Merely Wall St article is basic in nature. It isn’t a suggestion to purchase or promote any inventory, and doesn’t have in mind your targets or your monetary state of affairs. We intention to carry you long-term, focused evaluation based mostly on elementary information. Word that our evaluation might not have in mind the most recent bulletins from value delicate corporations or qualitative data. Merely Wall St has no place in any of the shares talked about.
*Interactive Brokers ranked Least Costly Dealer by Annual On-line Evaluation 2020

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