Seikitokyu Kogyo (TSE:1898) Has Announced A Dividend Of ¥35.00
Seikitokyu Kogyo Co., Ltd. (TSE:1898) has announced that it will pay a dividend of ¥35.00 per share on the 25th of June. The yield is still above the industry average at 4.4%.
Seikitokyu Kogyo's Payment Could Potentially Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Seikitokyu Kogyo's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Unless the company can turn things around, EPS could fall by 3.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 73%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Check out our latest analysis for Seikitokyu Kogyo
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥15.00 in 2015 to the most recent total annual payment of ¥70.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Seikitokyu Kogyo May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Seikitokyu Kogyo's EPS has declined at around 3.7% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
Our Thoughts On Seikitokyu Kogyo's Dividend
Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Seikitokyu Kogyo (of which 1 is potentially serious!) you should know about. Is Seikitokyu Kogyo not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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