Sankyo TateyamaInc (TSE:5932) Will Pay A Dividend Of ¥12.50

Sankyo Tateyama,Inc. (TSE:5932) has announced that it will pay a dividend of ¥12.50 per share on the 29th of August. This makes the dividend yield 3.9%, which is above the industry average.

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Sankyo TateyamaInc Might Find It Hard To Continue The Dividend

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Even though Sankyo TateyamaInc isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Looking forward, earnings per share could rise by 1.2% over the next year if the trend from the last few years continues. It's nice to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

Check out our latest analysis for Sankyo TateyamaInc

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ¥35.00 total annually to ¥25.00. This works out to be a decline of approximately 3.3% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Sankyo TateyamaInc's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. With EPS growth hard to come by and the company not turning a profit, we wouldn't be particularly optimistic about the growth prospects for Sankyo TateyamaInc's dividend in the future.

Our Thoughts On Sankyo TateyamaInc's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Sankyo TateyamaInc'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 don't think Sankyo TateyamaInc is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Sankyo TateyamaInc (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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