Sumitomo Bakelite (TSE:4203) Is Increasing Its Dividend To ¥55.00
Sumitomo Bakelite Company Limited (TSE:4203) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of June to ¥55.00. The payment will take the dividend yield to 2.1%, which is in line with the average for the industry.
Sumitomo Bakelite's Payment Could Potentially Have Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Sumitomo Bakelite's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 16.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.
Check out our latest analysis for Sumitomo Bakelite
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 ¥25.00 total annually to ¥110.00. This means that it has been growing its distributions at 16% per annum over that time. 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 Sumitomo Bakelite has grown earnings per share at 34% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Sumitomo Bakelite could prove to be a strong dividend payer.
Sumitomo Bakelite Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Sumitomo Bakelite that investors should know about before committing capital to this stock. Is Sumitomo Bakelite not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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