Sata Construction (TSE:1826) Will Pay A Dividend Of ¥60.00
The board of Sata Construction Co., Ltd. (TSE:1826) has announced that it will pay a dividend on the 17th of July, with investors receiving ¥60.00 per share. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.
Estimates Indicate Sata Construction's Could Struggle to Maintain Dividend Payments In The Future
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the dividend made up 122% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.
Looking forward, EPS could fall by 4.7% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 116%, which could put the dividend in jeopardy if the company's earnings don't improve.
View our latest analysis for Sata Construction
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2016, the dividend has gone from ¥37.50 total annually to ¥60.00. This means that it has been growing its distributions at 4.8% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend's Growth Prospects Are Limited
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. Over the past five years, it looks as though Sata Construction's EPS has declined at around 4.7% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Sata Construction's Dividend Doesn't Look Great
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Sata Construction (3 are a bit concerning!) that you should be aware of before investing. Is Sata Construction not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.