Seibu GikenLtd's (TSE:6223) Dividend Will Be Increased To ¥70.00

Seibu Giken Co.,Ltd. (TSE:6223) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of March to ¥70.00. This will take the dividend yield to an attractive 5.1%, providing a nice boost to shareholder returns.

View our latest analysis for Seibu GikenLtd

Seibu GikenLtd's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Seibu GikenLtd's dividend was only 33% of earnings, however it was paying out 101% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 11.6% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

Seibu GikenLtd Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Seibu GikenLtd has impressed us by growing EPS at 12% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Seibu GikenLtd 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. 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 example, we've picked out 2 warning signs for Seibu GikenLtd that investors should know about before committing capital to this stock. Is Seibu GikenLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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