The board of Seiko Group Corporation (TSE:8050) has announced that it will pay a dividend on the 30th of June, with investors receiving ¥45.00 per share. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.
See our latest analysis for Seiko Group
Seiko Group's Future Dividend Projections Appear Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Seiko Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
The next year is set to see EPS grow by 8.4%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥25.00 in 2014 to the most recent total annual payment of ¥90.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Seiko Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
Seiko Group Could Grow Its Dividend
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. Seiko Group has seen EPS rising for the last five years, at 8.1% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Seiko Group's prospects of growing its dividend payments in the future.
We Really Like Seiko Group's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Seiko Group that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
About TSE:8050
Seiko Group
Engages in watches, devices solutions, systems solutions, apparels, clocks, fashion accessories, and other businesses in Japan and internationally.
Solid track record with excellent balance sheet and pays a dividend.
