We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Taiwan Steel Union's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share could rise by 15.8% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 74% by next year, which is in a pretty sustainable range.
The main theme of domestic favourable macro front remains unchanged, SHFE aluminium prices showed a ‘v-shaped’ rebound today
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