Lee Chi Enterprises (TWSE:1517) Will Pay A Smaller Dividend Than Last Year

Lee Chi Enterprises Company Ltd. (TWSE:1517) is reducing its dividend from last year's comparable payment to NT$0.20 on the 9th of October. This payment takes the dividend yield to 1.2%, which only provides a modest boost to overall returns.

Check out our latest analysis for Lee Chi Enterprises

Lee Chi Enterprises Might Find It Hard To Continue The Dividend

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. While Lee Chi Enterprises is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS could expand by 4.9% if recent trends continue. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from NT$0.70 total annually to NT$0.20. This works out to a decline of approximately 71% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Lee Chi Enterprises May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been crawling upwards at 4.9% per year. With EPS growth hard to come by and the company not turning a profit, we wouldn't be particularly optimistic about the growth prospects for Lee Chi Enterprises' dividend in the future.

Our Thoughts On Lee Chi Enterprises' Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Lee Chi Enterprises stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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