Matsuoka (TSE:3611) Has Announced That It Will Be Increasing Its Dividend To ¥90.00

Matsuoka Corporation (TSE:3611) will increase its dividend from last year's comparable payment on the 30th of June to ¥90.00. This makes the dividend yield 4.5%, which is above the industry average.

View our latest analysis for Matsuoka

Matsuoka's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Matsuoka's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 7.7% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 46%, which is definitely feasible to continue.

Matsuoka Doesn't Have A Long Payment History

It is great to see that Matsuoka has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 7 years was ¥40.00 in 2018, and the most recent fiscal year payment was ¥90.00. This means that it has been growing its distributions at 12% per annum over that time. Matsuoka has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Matsuoka has seen earnings per share falling at 7.7% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Matsuoka's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Matsuoka's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Matsuoka that investors should take into consideration. Is Matsuoka not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.