The board of Matsuoka Corporation (TSE:3611) has announced that it will be increasing its dividend by 25% on the 26th of June to ¥50.00, up from last year's comparable payment of ¥40.00. This will take the dividend yield to an attractive 2.6%, providing a nice boost to shareholder returns.
Check out our latest analysis for Matsuoka
Matsuoka's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Matsuoka's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Over the next year, EPS could expand by 4.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.
Matsuoka Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The payments haven't really changed that much since 6 years ago. Matsuoka hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
Matsuoka May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 4.7% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Matsuoka has the option to increase the payout ratio to return more cash to shareholders.
Our Thoughts On Matsuoka's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Matsuoka you should be aware of, and 1 of them is significant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About TSE:3611
Matsuoka
Engages in planning, manufacturing, and selling apparel products in Japan and internationally.
Adequate balance sheet second-rate dividend payer.
