MATSUDA SANGYO (TSE:7456) Has Announced That It Will Be Increasing Its Dividend To ¥45.00

The board of MATSUDA SANGYO Co., Ltd. (TSE:7456) has announced that it will be paying its dividend of ¥45.00 on the 10th of December, an increased payment from last year's comparable dividend. This makes the dividend yield 2.6%, which is above the industry average.

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MATSUDA SANGYO's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, MATSUDA SANGYO's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 7.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

View our latest analysis for MATSUDA SANGYO

MATSUDA SANGYO Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥24.00 in 2015, and the most recent fiscal year payment was ¥90.00. This means that it has been growing its distributions at 14% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that MATSUDA SANGYO has been growing its earnings per share at 19% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for MATSUDA SANGYO's prospects of growing its dividend payments in the future.

Our Thoughts On MATSUDA SANGYO's Dividend

In summary, while it's always good to see the dividend being raised, we don't think MATSUDA SANGYO's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For instance, we've picked out 1 warning sign for MATSUDA SANGYO that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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