Sumitomo DensetsuLtd (TSE:1949) Will Pay A Dividend Of ¥60.00

The board of Sumitomo Densetsu Co.,Ltd. (TSE:1949) has announced that it will pay a dividend on the 26th of June, with investors receiving ¥60.00 per share. This makes the dividend yield about the same as the industry average at 2.7%.

Check out our latest analysis for Sumitomo DensetsuLtd

Sumitomo DensetsuLtd's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Sumitomo DensetsuLtd's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 0.5% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 38%, which is comfortable for the company to continue in the future.

Sumitomo DensetsuLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥24.00, compared to the most recent full-year payment of ¥120.00. This means that it has been growing its distributions at 17% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Sumitomo DensetsuLtd has seen EPS rising for the last five years, at 17% per annum. Sumitomo DensetsuLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Sumitomo DensetsuLtd's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Sumitomo DensetsuLtd that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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