Step Co.,Ltd. (TSE:9795) has announced that it will pay a dividend of ¥37.00 per share on the 19th of December. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.
View our latest analysis for StepLtd
StepLtd's Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, StepLtd was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS could expand by 7.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.
StepLtd Doesn't Have A Long Payment History
Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2019, the annual payment back then was ¥40.00, compared to the most recent full-year payment of ¥74.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.
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 StepLtd has grown earnings per share at 7.3% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
In Summary
Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
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. For instance, we've picked out 1 warning sign for StepLtd that investors should take into consideration. 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:9795
Flawless balance sheet and good value.
