SintokogioLtd (TSE:6339) Will Pay A Dividend Of ¥22.00
Sintokogio,Ltd. (TSE:6339) has announced that it will pay a dividend of ¥22.00 per share on the 10th of June. This makes the dividend yield 4.1%, which will augment investor returns quite nicely.
SintokogioLtd'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. Before making this announcement, SintokogioLtd was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.
If the trend of the last few years continues, EPS will grow by 37.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 75%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
View our latest analysis for SintokogioLtd
SintokogioLtd Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was ¥16.00, compared to the most recent full-year payment of ¥44.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
SintokogioLtd Might Find It Hard To Grow Its Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that SintokogioLtd has been growing its earnings per share at 38% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why SintokogioLtd is not retaining those earnings to reinvest in growth.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about SintokogioLtd's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, SintokogioLtd has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is SintokogioLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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