Sotoh (TSE:3571) Has Announced A Dividend Of ¥15.00

Sotoh Co., Ltd.'s (TSE:3571) investors are due to receive a payment of ¥15.00 per share on 2nd of December. This takes the dividend yield to 5.8%, which shareholders will be pleased with.

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Sotoh'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. Based on the last payment, Sotoh 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.

Earnings per share could rise by 54.8% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 77% which is a bit high but can definitely be sustainable.

View our latest analysis for Sotoh

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. The most recent annual payment of ¥40.00 is about the same as the annual payment 10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Sotoh has been growing its earnings per share at 55% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Sotoh's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Sotoh's payments are rock solid. 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.

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 4 warning signs for Sotoh that investors need to be conscious of moving forward. Is Sotoh not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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