Sohgo Security ServicesLtd's (TSE:2331) Dividend Will Be ¥12.40

Sohgo Security Services Co.,Ltd. (TSE:2331) has announced that it will pay a dividend of ¥12.40 per share on the 4th of December. This will take the dividend yield to an attractive 2.4%, providing a nice boost to shareholder returns.

See our latest analysis for Sohgo Security ServicesLtd

Sohgo Security ServicesLtd's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Sohgo Security ServicesLtd's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 6.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

Sohgo Security ServicesLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥5.00 in 2014, and the most recent fiscal year payment was ¥24.80. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Sohgo Security ServicesLtd has only grown its earnings per share at 3.2% per annum over the past five years. Sohgo Security ServicesLtd is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Sohgo Security ServicesLtd Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Sohgo Security ServicesLtd for free with public analyst estimates for the company. Is Sohgo Security ServicesLtd 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.