ES-CON JAPAN (TSE:8892) Has Announced A Dividend Of ¥48.00

The board of ES-CON JAPAN Ltd. (TSE:8892) has announced that it will pay a dividend of ¥48.00 per share on the 26th of June. This makes the dividend yield 4.9%, which will augment investor returns quite nicely.

View our latest analysis for ES-CON JAPAN

ES-CON JAPAN's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, ES-CON JAPAN's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, could fall by 10.6% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 92%, which is definitely on the higher side.

ES-CON JAPAN 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 dividend has gone from an annual total of ¥2.00 in 2014 to the most recent total annual payment of ¥48.00. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. 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 Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On ES-CON JAPAN's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for ES-CON JAPAN (of which 2 are significant!) you should know about. Is ES-CON JAPAN 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.