Satoh (TSE:9996) Has Announced That It Will Be Increasing Its Dividend To ¥23.00

Satoh & Co., Ltd. (TSE:9996) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of June to ¥23.00. This takes the dividend yield to 2.4%, which shareholders will be pleased with.

View our latest analysis for Satoh

Satoh's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Satoh was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 4.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

Satoh Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥24.00 total annually to ¥44.00. This means that it has been growing its distributions at 6.2% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Satoh has only grown its earnings per share at 4.2% per annum over the past five years. While EPS growth is quite low, Satoh has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Satoh's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Satoh'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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Satoh that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.