Central Security Patrols (TSE:9740) Is Due To Pay A Dividend Of ¥30.00

The board of Central Security Patrols Co., Ltd. (TSE:9740) has announced that it will pay a dividend on the 2nd of June, with investors receiving ¥30.00 per share. This means the dividend yield will be fairly typical at 2.1%.

View our latest analysis for Central Security Patrols

Central Security Patrols' Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Central Security Patrols' dividend was only 48% of earnings, however it was paying out 154% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS is forecast to expand by 8.2%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from ¥28.00 total annually to ¥60.00. This means that it has been growing its distributions at 7.9% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Central Security Patrols might have put its house in order since then, but we remain cautious.

Central Security Patrols May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Central Security Patrols has only grown its earnings per share at 2.6% per annum over the past five years. Central Security Patrols is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Central Security Patrols' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Central Security Patrols is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Central Security Patrols that investors need to be conscious of moving forward. Is Central Security Patrols not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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