Sekisui Jushi's (TSE:4212) Dividend Will Be Increased To ¥35.00

Sekisui Jushi Corporation (TSE:4212) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥35.00. This makes the dividend yield 2.9%, which is above the industry average.

Check out our latest analysis for Sekisui Jushi

Sekisui Jushi's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Sekisui Jushi's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Unless the company can turn things around, EPS could fall by 3.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 57%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Sekisui Jushi Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥26.00, compared to the most recent full-year payment of ¥70.00. This means that it has been growing its distributions at 10% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Sekisui Jushi 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. Over the past five years, it looks as though Sekisui Jushi's EPS has declined at around 3.8% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On Sekisui Jushi's Dividend

Overall, we always like to see the dividend being raised, but we don't think Sekisui Jushi will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Sekisui Jushi has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is Sekisui Jushi not quite the opportunity you were looking for? Why not check out our selection of top 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.