Sangetsu Corporation's (TSE:8130) investors are due to receive a payment of ¥75.00 per share on 2nd of December. This will take the annual payment to 5.1% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Sangetsu
Sangetsu's Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Sangetsu's dividend was only 58% of earnings, however it was paying out 113% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
Looking forward, earnings per share is forecast to fall by 0.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 69%, which is comfortable for the company to continue in the future.
Sangetsu Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥37.50 in 2014 to the most recent total annual payment of ¥150.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. Sangetsu has seen EPS rising for the last five years, at 34% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Sangetsu could prove to be a strong dividend payer.
In Summary
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. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Sangetsu (of which 1 is significant!) you should know about. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
About TSE:8130
Sangetsu
Engages in the planning, development, manufacture, sale, and installation of interior decorating products in Japan and internationally.
Flawless balance sheet established dividend payer.
