Gecoss (TSE:9991) Has Affirmed Its Dividend Of ¥20.00

The board of Gecoss Corporation (TSE:9991) has announced that it will pay a dividend on the 24th of June, with investors receiving ¥20.00 per share. The dividend yield will be 3.2% based on this payment which is still above the industry average.

View our latest analysis for Gecoss

Gecoss' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Gecoss was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 0.1% if recent trends continue. If the dividend continues on this path, the payout ratio could be 32% 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 dividend has gone from an annual total of ¥10.00 in 2014 to the most recent total annual payment of ¥37.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Gecoss has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Gecoss May Find It Hard To Grow The Dividend

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. However, Gecoss' EPS was effectively flat over the past five years, which could stop the company from paying more every year. While growth may be thin on the ground, Gecoss could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Gecoss' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Gecoss is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Gecoss you should be aware of, and 1 of them is significant. Is Gecoss not quite the opportunity you were looking for? Why not check out our selection of top 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.