Musashi Seimitsu Industry (TSE:7220) Has Announced A Dividend Of ¥25.00

Musashi Seimitsu Industry Co., Ltd. (TSE:7220) has announced that it will pay a dividend of ¥25.00 per share on the 2nd of December. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

See our latest analysis for Musashi Seimitsu Industry

Musashi Seimitsu Industry's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Musashi Seimitsu Industry's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 18.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ¥22.00, compared to the most recent full-year payment of ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.6% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Musashi Seimitsu Industry might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Musashi Seimitsu Industry's earnings per share has shrunk at approximately 4.9% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Musashi Seimitsu Industry's Dividend

Overall, we always like to see the dividend being raised, but we don't think Musashi Seimitsu Industry will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

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. As an example, we've identified 3 warning signs for Musashi Seimitsu Industry that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com