Seikitokyu Kogyo (TSE:1898) Has Announced A Dividend Of ¥45.00

Seikitokyu Kogyo Co., Ltd.'s (TSE:1898) investors are due to receive a payment of ¥45.00 per share on 24th of June. Based on this payment, the dividend yield on the company's stock will be 5.7%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Seikitokyu Kogyo

Estimates Indicate Seikitokyu Kogyo's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Looking forward, EPS could fall by 5.5% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 123%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥10.00 in 2015, and the most recent fiscal year payment was ¥90.00. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Is Doubtful

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. Seikitokyu Kogyo has seen earnings per share falling at 5.5% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Seikitokyu Kogyo's Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Seikitokyu Kogyo 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.