Sega Sammy Holdings (TSE:6460) Has Announced That It Will Be Increasing Its Dividend To ¥28.00

Sega Sammy Holdings Inc. (TSE:6460) will increase its dividend from last year's comparable payment on the 4th of June to ¥28.00. This takes the dividend yield to 2.1%, which shareholders will be pleased with.

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Sega Sammy Holdings' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Sega Sammy Holdings was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 23.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Sega Sammy Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥40.00, compared to the most recent full-year payment of ¥56.00. This implies that the company grew its distributions at a yearly rate of about 3.4% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Sega Sammy Holdings has grown earnings per share at 22% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Sega Sammy Holdings' 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For instance, we've picked out 2 warning signs for Sega Sammy Holdings that investors should take into consideration. Is Sega Sammy Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.