Central Glass' (TSE:4044) Dividend Will Be ¥85.00

Central Glass Co., Ltd. (TSE:4044) has announced that it will pay a dividend of ¥85.00 per share on the 2nd of December. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

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Central Glass' Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 120% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 23%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

The next 12 months is set to see EPS grow by 31.4%. If the dividend continues on its recent course, the payout ratio in 12 months could be 104%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Central Glass

Central Glass 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 ¥40.00, compared to the most recent full-year payment of ¥170.00. This means that it has been growing its distributions at 16% 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.

Central Glass May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Central Glass hasn't seen much change in its earnings per share over the last five years. So the company has struggled to grow its EPS yet it's still paying out 120% of its earnings. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Central Glass' payments, as there could be some issues with sustaining them into the future. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for Central Glass that investors should take into consideration. 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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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.