Gecoss (TSE:9991) Will Pay A Dividend Of ¥23.00

The board of Gecoss Corporation (TSE:9991) has announced that it will pay a dividend of ¥23.00 per share on the 2nd of December. This will take the dividend yield to an attractive 4.6%, providing a nice boost to shareholder returns.

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Gecoss' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Gecoss was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 2.2% over the next 12 months. 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.

See our latest analysis for Gecoss

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥12.00 in 2015, and the most recent fiscal year payment was ¥57.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. 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.

Gecoss May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 2.2% per annum over the last five years, which admittedly is a bit slow. Gecoss is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Gecoss' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. To that end, Gecoss has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.