The board of METAWATER Co., Ltd. (TSE:9551) has announced that it will pay a dividend on the 4th of December, with investors receiving ¥24.00 per share. This will take the dividend yield to an attractive 2.8%, providing a nice boost to shareholder returns.
View our latest analysis for METAWATER
METAWATER's Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, METAWATER's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
The next year is set to see EPS grow by 4.4%. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.
METAWATER Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from ¥29.00 total annually to ¥48.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
The Dividend Has Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. METAWATER has impressed us by growing EPS at 9.2% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
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. For example, we've picked out 1 warning sign for METAWATER 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:9551
METAWATER
Designs and constructs equipment for water purification plants, sewage treatment plants, and waste treatment facilities in Japan and internationally.
Very undervalued with solid track record and pays a dividend.
