Taitron Components Incorporated's (NASDAQ:TAIT) investors are due to receive a payment of $0.05 per share on 28th of February. This means the annual payment is 7.6% of the current stock price, which is above the average for the industry.

See our latest analysis for Taitron Components

Taitron Components' Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Taitron Components' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 235% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Looking forward, EPS could fall by 4.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 106%, which could put the dividend in jeopardy if the company's earnings don't improve.

Taitron Components Doesn't Have A Long Payment History

Taitron Components' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 9 years was $0.10 in 2016, and the most recent fiscal year payment was $0.20. This means that it has been growing its distributions at 8.0% per annum over that time. Taitron Components has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

Taitron Components May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that Taitron Components' earnings per share has fallen at approximately 4.0% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 4 warning signs for Taitron Components that investors should know about before committing capital to this stock. Is Taitron Components not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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