Star Micronics Co., Ltd.'s (TSE:7718) investors are due to receive a payment of ¥30.00 per share on 6th of September. This makes the dividend yield 3.3%, which will augment investor returns quite nicely.
View our latest analysis for Star Micronics
Star Micronics' Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Star Micronics was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 23.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.
Star Micronics Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥34.00, compared to the most recent full-year payment of ¥60.00. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Unfortunately, Star Micronics' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Our Thoughts On Star Micronics' Dividend
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Star Micronics that investors should know about before committing capital to this stock. 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.
About TSE:7718
Star Micronics
Produces and sells CNC automatic lathes and other products in Japan, rest of Asia, the United States, and Europe.
Flawless balance sheet established dividend payer.
