Eslead's (TSE:8877) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Eslead Corporation (TSE:8877) has announced that it will be paying its dividend of ¥105.00 on the 2nd of December, an increased payment from last year's comparable dividend. This makes the dividend yield 4.5%, which is above the industry average.

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Eslead's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Eslead is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 13.0% over the next 12 months. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Eslead

Eslead Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥25.00 in 2015, and the most recent fiscal year payment was ¥210.00. This means that it has been growing its distributions at 24% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Eslead has seen EPS rising for the last five years, at 13% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Eslead's prospects of growing its dividend payments in the future.

Our Thoughts On Eslead's Dividend

Overall, we always like to see the dividend being raised, but we don't think Eslead will make a great income stock. While Eslead is earning enough to cover the payments, the cash flows are lacking. We don't think Eslead is a great stock to add to your portfolio if income is your focus.

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. To that end, Eslead has 3 warning signs (and 2 which make us uncomfortable) we think 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.