TechMatrix's (TSE:3762) Upcoming Dividend Will Be Larger Than Last Year's
TechMatrix Corporation (TSE:3762) will increase its dividend from last year's comparable payment on the 15th of June to ¥28.00. This will take the annual payment to 2.1% of the stock price, which is above what most companies in the industry pay.
TechMatrix's Payment Could Potentially Have Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, TechMatrix's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 15.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.
Check out our latest analysis for TechMatrix
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥3.75 total annually to ¥49.00. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that TechMatrix has grown earnings per share at 16% per year over the past five years. TechMatrix definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like TechMatrix's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for TechMatrix that investors should take into consideration. 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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