Satoh & Co., Ltd. (TSE:9996) will pay a dividend of ¥20.00 on the 1st of July. This takes the dividend yield to 2.0%, which shareholders will be pleased with.
See our latest analysis for Satoh
Satoh's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Satoh's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Unless the company can turn things around, EPS could fall by 0.09% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 31%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Satoh Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥24.00, compared to the most recent full-year payment of ¥40.00. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Dividend Growth May Be Hard To Achieve
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. However, Satoh's EPS was effectively flat over the past five years, which could stop the company from paying more every year.
Our Thoughts On Satoh's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
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. Taking the debate a bit further, we've identified 1 warning sign for Satoh that investors need to be conscious of moving forward. 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.
About TSE:9996
Solid track record with excellent balance sheet and pays a dividend.
