Seiko Electric (TSE:6653) Has Announced That It Will Be Increasing Its Dividend To ¥20.00

Seiko Electric Co., Ltd. (TSE:6653) has announced that it will be increasing its periodic dividend on the 26th of August to ¥20.00, which will be 14% higher than last year's comparable payment amount of ¥17.50. This makes the dividend yield 2.6%, which is above the industry average.

Check out our latest analysis for Seiko Electric

Seiko Electric's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Seiko Electric's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 13.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.

Seiko Electric Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥10.00 in 2014, and the most recent fiscal year payment was ¥35.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Seiko Electric has been growing its earnings per share at 13% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Seiko Electric's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

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. See if management have their own wealth at stake, by checking insider shareholdings in Seiko Electric stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.