MATSUDA SANGYO Co., Ltd. (TSE:7456) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of December to ¥35.00. This will take the annual payment to 2.4% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for MATSUDA SANGYO
MATSUDA SANGYO's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. MATSUDA SANGYO is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Looking forward, earnings per share is forecast to rise by 9.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.
MATSUDA SANGYO Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥24.00, compared to the most recent full-year payment of ¥70.00. This means that it has been growing its distributions at 11% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. MATSUDA SANGYO has impressed us by growing EPS at 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Our Thoughts On MATSUDA SANGYO's Dividend
Overall, we always like to see the dividend being raised, but we don't think MATSUDA SANGYO will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 MATSUDA SANGYO that investors should know about before committing capital to this stock. Is MATSUDA SANGYO 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.
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About TSE:7456
MATSUDA SANGYO
Engages in the precious metals, environmental, and food businesses in Japan.
Undervalued with excellent balance sheet and pays a dividend.
