Zuiko (TSE:6279) Is Due To Pay A Dividend Of ¥5.00

Zuiko Corporation (TSE:6279) will pay a dividend of ¥5.00 on the 20th of May. This means that the dividend yield is 1.6%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Zuiko

Zuiko's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before this announcement, Zuiko was paying out 121% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Looking forward, could fall by 24.5% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 81% in the next 12 months which is on the higher end of the range we would say is sustainable.

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. The annual payment during the last 10 years was ¥18.75 in 2014, and the most recent fiscal year payment was ¥20.00. Dividend payments have been growing, but very slowly over the period. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 25% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Zuiko's Dividend Doesn't Look Great

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Zuiko (of which 1 makes us a bit uncomfortable!) you should know about. 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.