Satoh & Co., Ltd. (TSE:9996) will increase its dividend from last year's comparable payment on the 9th of December to ¥22.00. This will take the annual payment to 2.6% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Satoh
Satoh's Future Dividend Projections Appear Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Satoh's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 2.8% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.
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 ¥45.00. This means that it has been growing its distributions at 6.5% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Satoh May Find It Hard To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 2.8% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Satoh has the option to increase the payout ratio to return more cash to shareholders.
Satoh Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Satoh that you should be aware of before investing. Is Satoh 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.
About TSE:9996
Flawless balance sheet established dividend payer.
