Punch Industry (TSE:6165) Is Due To Pay A Dividend Of ¥9.41
The board of Punch Industry Co., Ltd. (TSE:6165) has announced that it will pay a dividend on the 25th of June, with investors receiving ¥9.41 per share. However, the dividend yield of 3.8% is still a decent boost to shareholder returns.
Punch Industry's Payment Could Potentially Have Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Punch Industry's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS could expand by 6.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.
View our latest analysis for Punch Industry
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥18.54. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
We Could See Punch Industry's Dividend Growing
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Punch Industry has impressed us by growing EPS at 6.8% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
In Summary
Even though the dividend was cut this year, we think Punch Industry has the ability to make consistent payments in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Punch Industry that investors need to be conscious of moving forward. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.