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 will take the annual payment to 3.8% of the stock price, which is above what most companies in the industry pay.

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Eslead's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Eslead's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 8.7% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Eslead

Eslead Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. 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. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Eslead Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Eslead has impressed us by growing EPS at 8.7% per year over the past five years. Eslead definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Eslead you should be aware of, and 1 of them shouldn't be ignored. Is Eslead 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.