The board of Sato Holdings Corporation (TSE:6287) has announced that it will pay a dividend on the 11th of December, with investors receiving ¥37.00 per share. This makes the dividend yield 3.7%, which is above the industry average.
See our latest analysis for Sato Holdings
Sato Holdings' Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Sato Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 20.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 59% by next year, which is in a pretty sustainable range.
Sato Holdings Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥38.00 total annually to ¥74.00. This means that it has been growing its distributions at 6.9% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Sato Holdings hasn't seen much change in its earnings per share over the last five years.
In Summary
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Sato Holdings that investors should know about before committing capital to this stock. Is Sato Holdings 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.
About TSE:6287
Sato Holdings
Engages in the manufacture and sale of labeling products in Japan and internationally.
Flawless balance sheet established dividend payer.
