Gecoss (TSE:9991) Will Pay A Larger Dividend Than Last Year At ¥28.00

Gecoss Corporation (TSE:9991) has announced that it will be increasing its dividend from last year's comparable payment on the 23rd of June to ¥28.00. This takes the dividend yield to 4.8%, which shareholders will be pleased with.

View our latest analysis for Gecoss

Gecoss' Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Gecoss' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 0.7% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥48.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% 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.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Gecoss hasn't seen much change in its earnings per share over the last five years. If Gecoss is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Gecoss has 2 warning signs (and 1 which is significant) 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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