SANNO's (TSE:3441) Upcoming Dividend Will Be Larger Than Last Year's

The board of SANNO Co., Ltd. (TSE:3441) has announced that it will be paying its dividend of ¥20.00 on the 28th of October, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

See our latest analysis for SANNO

SANNO's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, SANNO was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 4.3% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 28%, which is definitely feasible to continue.

SANNO Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2020, the dividend has gone from ¥5.00 total annually to ¥20.00. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. SANNO has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

SANNO May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that SANNO's earnings per share has fallen at approximately 4.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think SANNO's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for SANNO that investors should take into consideration. 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.