Star Micronics Co., Ltd. (TSE:7718) has announced that it will pay a dividend of ¥30.00 per share on the 12th of March. Based on this payment, the dividend yield on the company's stock will be 3.2%, which is an attractive boost to shareholder returns.
See our latest analysis for Star Micronics
Star Micronics' Payment Could Potentially Have Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Star Micronics' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 35.5%. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.
Star Micronics Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥34.00 total annually to ¥60.00. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Star Micronics May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Although it's important to note that Star Micronics' 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.
Our Thoughts On Star Micronics' Dividend
Overall, we think Star Micronics is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Star Micronics that investors need to be conscious of moving forward. Is Star Micronics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
