Mazda Motor (TSE:7261) Has Announced A Dividend Of ¥30.00

The board of Mazda Motor Corporation (TSE:7261) has announced that it will pay a dividend on the 26th of June, with investors receiving ¥30.00 per share. Based on this payment, the dividend yield on the company's stock will be 4.9%, which is an attractive boost to shareholder returns.

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Mazda Motor's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

EPS is set to grow by 35.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 83%, which is on the higher side, but certainly still feasible.

Check out our latest analysis for Mazda Motor

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥55.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% 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. Mazda Motor might have put its house in order since then, but we remain cautious.

Mazda Motor Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Mazda Motor has grown earnings per share at 27% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mazda Motor's payments, as there could be some issues with sustaining them into the future. Strong earnings growth means Mazda Motor has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Mazda Motor (of which 1 is a bit concerning!) you should know about. 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.