SMS' (TSE:2175) Dividend Will Be Increased To ¥28.50

The board of SMS Co., Ltd. (TSE:2175) has announced that the dividend on 24th of June will be increased to ¥28.50, which will be 43% higher than last year's payment of ¥20.00 which covered the same period. This takes the dividend yield to 1.6%, which shareholders will be pleased with.

See our latest analysis for SMS

SMS' 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. However, SMS' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 15.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

SMS Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥2.50 total annually to ¥20.00. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

We Could See SMS' Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that SMS has been growing its earnings per share at 9.6% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for SMS' prospects of growing its dividend payments in the future.

SMS Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that SMS is a strong income stock thanks to its track record and growing earnings. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for SMS that investors should know about before committing capital to this stock. Is SMS 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.