COSMOS Pharmaceutical's (TSE:3349) Dividend Will Be ¥37.50

The board of COSMOS Pharmaceutical Corporation (TSE:3349) has announced that it will pay a dividend on the 12th of February, with investors receiving ¥37.50 per share. Although the dividend is now higher, the yield is only 1.0%, which is below the industry average.

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COSMOS Pharmaceutical's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, COSMOS Pharmaceutical'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.

Over the next year, EPS is forecast to expand by 6.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for COSMOS Pharmaceutical

COSMOS Pharmaceutical Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥15.00, compared to the most recent full-year payment of ¥75.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that COSMOS Pharmaceutical has grown earnings per share at 5.3% per year over the past five years. COSMOS Pharmaceutical definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think COSMOS Pharmaceutical's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 12 COSMOS Pharmaceutical analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is COSMOS Pharmaceutical not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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