Stanley Electric (TSE:6923) Has Announced That It Will Be Increasing Its Dividend To ¥46.00

Stanley Electric Co., Ltd. (TSE:6923) will increase its dividend from last year's comparable payment on the 1st of December to ¥46.00. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.

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Stanley Electric's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Stanley Electric's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 14.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

See our latest analysis for Stanley Electric

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥32.00 in 2015, and the most recent fiscal year payment was ¥80.00. This means that it has been growing its distributions at 9.6% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Stanley Electric has been growing its earnings per share at 13% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Stanley Electric's Dividend

Overall, a dividend increase is always good, and we think that Stanley Electric is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. As an example, we've identified 1 warning sign for Stanley Electric that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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