Sekisui Chemical (TSE:4204) Will Pay A Larger Dividend Than Last Year At ¥36.00

Sekisui Chemical Co., Ltd. (TSE:4204) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of June to ¥36.00. This takes the dividend yield to 3.2%, which shareholders will be pleased with.

See our latest analysis for Sekisui Chemical

Sekisui Chemical's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Sekisui Chemical was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 5.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥72.00. This means that it has been growing its distributions at 14% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

We Could See Sekisui Chemical's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Sekisui Chemical has seen EPS rising for the last five years, at 6.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Sekisui Chemical's prospects of growing its dividend payments in the future.

Our Thoughts On Sekisui Chemical's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Taking the debate a bit further, we've identified 1 warning sign for Sekisui Chemical that investors need to be conscious of moving forward. 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.