Sekisui Chemical's (TSE:4204) Dividend Will Be ¥40.00

The board of Sekisui Chemical Co., Ltd. (TSE:4204) has announced that it will pay a dividend on the 2nd of December, with investors receiving ¥40.00 per share. This will take the dividend yield to an attractive 2.8%, providing a nice boost to shareholder returns.

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Sekisui Chemical's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Sekisui Chemical's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 11.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

View our latest analysis for Sekisui Chemical

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥26.00 in 2015, and the most recent fiscal year payment was ¥80.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Sekisui Chemical has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Sekisui Chemical Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Sekisui Chemical has impressed us by growing EPS at 7.3% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Sekisui Chemical 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.