A stock is a micro share in a company that gives out dividends as a part of their profit to the stock owners. While the ideal stocks pay out dividends to the owners, it is not necessary for stocks to pay out dividends. As a matter of fact, many companies don’t pay out dividends in their early days.
Today, we are going to brief you about a company that pays dividends and its major attraction for dividend hunters called Genesis Technology.
Sometimes, we measure the potential of a stock by its yield or dividend to price ratio to check how much payout one can get for the price of the stock. For Genesis Technology, the yield is 2.3% per year.
This may dishearten investors, as a low yield is a turn off in case of a stock market crash, but buyers are more crafty. When they buy a stock, they look at the long term prospects. With a simple analysis, we present to you the future prospects of Genesis stock, which just might surprise you.
Payout Ratios
Companies pay out a ratio of their profit. The payout ratio explains a lot about the company, company stability being one of them. If a company is paying out more in dividends then it is getting, that cannot be deemed as a proper strategy. As it continues this strategy, it may satisfy some investors in the short run, but in the long run, it will bleed out.
Genesis tech paid out 28% of its profits as dividends last year, which shows a balanced approach towards dividend sharing. The company is retaining a good amount of its profits, which shows good business foresight, as it will be able to reinvest in the future to increase production possibilities.
Another way we can analyze the genesis tech stocks is via the cash-payout ratio. This proportion gives us data with regards to whether an organization has created enough money to deliver its profit. It’s a decent proportion of the money solvency of the organization. For Genesis Tech, the money payout proportion a year ago was 9.5%. Which is obviously a low proportion.
The low ratio allows us to conclude that the dividend was thoroughly paid out from cash flow, which shows that the company balanced the dividend payout with profits and cash. This is a good sign for dividend hunters, as it shows that the dividend payout is reliable. With a profit and cash payout system, it can be sustained unless there was a fall in earnings.
Though we started this section talking about dividend payout ratios, it’s also important to look at Genesis Tech’s strong cash position, which is sustainable over time and reliable for any dividend hunter. Check out new articles about 5G on Bizreviewed for more insight.
Scales of volatility in dividend
Dividend volatility is another metric to watch out for. It shows how much the dividend amount fluctuates, or how volatile it is overtime. It can also express the consistency in a dividend payout of a company. For dividend hunters, this is a good measure of future stability.
For Genesis Tech, the first payout in this decade was nine years ago, and it has paid out dividends over several years now. Only one time has there been a cut in dividend payout, which is a cautionary tale of the dividend payout capability over an economic cycle, for the company itself should be a matter of consideration here.
Since opening, the first dividend payout from the company was NT $0.46 in 2011. In 2019, it paid out NT $1.11 in dividend payout. This helps us calculate the compounded annual growth rate(CAGR) over time. The way things are, the CAGR for Genesis Tech over the previous years was 10% every year. Despite the fact that development in profits for Genesis Tech wasn’t predictable throughout the years, the CAGR is a close guess of the pace of progress over this time period.
The cut in dividend raises some worry for the investors. It is a bad sign for public companies as they do not perform well under an economic downturn.
Potential for dividend growth in the future
With the volatile nature of the company’s dividends, we start to analyze future dividend potentials. With this, the earning per share(EPS) is a good measure. An increase in earning per share indicates the company is earning more after taxes and depreciation than before, which shows the operating efficiency. This could restore confidence by assuring the investors about the future prospects of the company.
Genesis Tech has been increasing its earnings per share consistently by 26% per annum for the last 5 years. This is a good indicator for dividend hunters. With a high growth rate in earning per share, it shows a positive outcome in dividend payment. It shows if earnings can be invested properly, then there’s a possibility of further growth in the future, which will eventually stabilize the dividend payout in the long run. In this analysis, Genesis Tech shows some positive attributes.
To wrap things up, dividend hunters should look at three things in a stock: a) affordability of dividend by the company, b) earning per share growth, and c) consistency in the dividend payout ratio. Genesis Technology performs really well in the first two departments. Though there was a cut in dividend payment, the CAGR showed positive opportunities. So, overall, the investors should give this a try.
