Seiko Group (TSE:8050) Will Pay A Dividend Of ¥55.00

The board of Seiko Group Corporation (TSE:8050) has announced that it will pay a dividend on the 5th of December, with investors receiving ¥55.00 per share. This makes the dividend yield 2.6%, which is above the industry average.

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Seiko Group's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Seiko Group 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 9.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Seiko Group

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥50.00 in 2015, and the most recent fiscal year payment was ¥110.00. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Seiko Group might have put its house in order since then, but we remain cautious.

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. Seiko Group has impressed us by growing EPS at 32% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Seiko Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Seiko Group is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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 2 warning signs for Seiko Group that investors need to be conscious of moving forward. Is Seiko Group 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.