Matsui Construction's (TSE:1810) Dividend Will Be ¥15.00

Matsui Construction Co., Ltd.'s (TSE:1810) investors are due to receive a payment of ¥15.00 per share on 30th of June. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

View our latest analysis for Matsui Construction

Estimates Indicate Matsui Construction's Could Struggle to Maintain Dividend Payments In The Future

We aren't too impressed by dividend yields unless they can be sustained over time. Matsui Construction is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the company can't turn things around, EPS could fall by 15.1% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 114%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥8.00 in 2014 to the most recent total annual payment of ¥28.00. This means that it has been growing its distributions at 13% per annum over that time. Matsui Construction has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Matsui Construction's EPS has declined at around 15% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Matsui Construction's payments are rock solid. While Matsui Construction is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Matsui Construction has 4 warning signs (and 2 which are potentially serious) we think 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.