The board of 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.
Check out our latest analysis for StepLtd
StepLtd's Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by StepLtd's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS could expand by 4.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.
StepLtd Is Still Building Its Track Record
StepLtd's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2019, the dividend has gone from ¥40.00 total annually to ¥74.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. 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.
StepLtd May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. However, StepLtd has only grown its earnings per share at 4.7% per annum over the past five years. Growth of 4.7% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.
In Summary
Even though the dividend was cut this year, we think StepLtd has the ability to make consistent payments in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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.
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About TSE:9795
Flawless balance sheet and good value.
