EPCOLtd (TSE:2311) Will Pay A Dividend Of ¥14.00

The board of EPCO Co.,Ltd. (TSE:2311) has announced that it will pay a dividend of ¥14.00 per share on the 4th of September. Based on this payment, the dividend yield on the company's stock will be 3.7%, which is an attractive boost to shareholder returns.

View our latest analysis for EPCOLtd

EPCOLtd's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, EPCOLtd's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

If the trend of the last few years continues, EPS will grow by 16.7% over the next 12 months. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 40% which brings it into quite a comfortable range.

EPCOLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥25.00 in 2014 to the most recent total annual payment of ¥32.00. This means that it has been growing its distributions at 2.5% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

EPCOLtd Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that EPCOLtd has grown earnings per share at 17% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

Our Thoughts On EPCOLtd's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 3 warning signs for EPCOLtd 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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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.