EPCOLtd (TSE:2311) Is Due To Pay A Dividend Of ¥14.00

EPCO Co.,Ltd.'s (TSE:2311) investors are due to receive a payment of ¥14.00 per share on 3rd of September. The dividend yield will be 4.6% based on this payment which is still above the industry average.

We've discovered 3 warning signs about EPCOLtd. View them for free.

EPCOLtd's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, EPCOLtd was paying out a very large proportion of what it was earning and 115% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, could fall by 5.3% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 94% in the next 12 months which is on the higher end of the range we would say is sustainable.

Check out our latest analysis for EPCOLtd

EPCOLtd Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥27.50 in 2015 to the most recent total annual payment of ¥32.00. This works out to be a compound annual growth rate (CAGR) of approximately 1.5% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. In the last five years, EPCOLtd's earnings per share has shrunk at approximately 5.3% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

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 EPCOLtd's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. We don't think EPCOLtd is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for EPCOLtd that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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