Sanko Gosei (TSE:7888) Will Pay A Dividend Of ¥10.00

Sanko Gosei Ltd. (TSE:7888) will pay a dividend of ¥10.00 on the 1st of September. The dividend yield will be 3.0% based on this payment which is still above the industry average.

Check out our latest analysis for Sanko Gosei

Sanko Gosei's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Sanko Gosei was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 15.5%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥6.00 in 2015, and the most recent fiscal year payment was ¥20.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

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. It's encouraging to see that Sanko Gosei has been growing its earnings per share at 30% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Sanko Gosei's Dividend

Overall, we like to see the dividend staying consistent, and we think Sanko Gosei might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For instance, we've picked out 1 warning sign for Sanko Gosei that investors should take into consideration. 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.