MATSUDA SANGYO's (TSE:7456) Shareholders Will Receive A Bigger Dividend Than Last Year

MATSUDA SANGYO Co., Ltd.'s (TSE:7456) dividend will be increasing from last year's payment of the same period to ¥35.00 on 6th of December. This takes the dividend yield to 2.4%, which shareholders will be pleased with.

See our latest analysis for MATSUDA SANGYO

MATSUDA SANGYO's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, MATSUDA SANGYO was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 9.4% over the next year. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

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 implies that the company grew its distributions at a yearly rate of about 11% over that duration. 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 could be attracted to the stock based on the quality of its payment history. It's encouraging to see that MATSUDA SANGYO has been growing its earnings per share at 17% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

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. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for MATSUDA SANGYO that investors need to be conscious of moving forward. 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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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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