SNT's (TSE:6319) Dividend Will Be Increased To ¥11.00

SNT Corporation's (TSE:6319) dividend will be increasing from last year's payment of the same period to ¥11.00 on 1st of July. This makes the dividend yield 3.7%, which is above the industry average.

Check out our latest analysis for SNT

SNT's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, SNT's dividend was only 31% of earnings, however it was paying out 134% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Unless the company can turn things around, EPS could fall by 0.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 37%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥6.00 total annually to ¥11.00. This implies that the company grew its distributions at a yearly rate of about 6.2% 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.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, SNT's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think SNT will make a great income stock. While SNT is earning enough to cover the payments, the cash flows are lacking. We don't think SNT is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for SNT that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.