Matsui Securities (TSE:8628) Is Paying Out A Larger Dividend Than Last Year

Matsui Securities Co., Ltd.'s (TSE:8628) dividend will be increasing from last year's payment of the same period to ¥25.00 on 25th of November. This makes the dividend yield 4.5%, which is above the industry average.

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Matsui Securities' Future Dividends May Potentially Be At Risk

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Matsui Securities was paying out 98% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Over the next year, EPS is forecast to expand by 5.8%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 100%, which probably can't continue without putting some pressure on the balance sheet.

Check out our latest analysis for Matsui Securities

Matsui Securities' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2021, the dividend has gone from ¥40.00 total annually to ¥36.00. This works out to be a decline of approximately 2.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Matsui Securities' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. This gives limited room for the company to raise the dividend in the future.

Matsui Securities' Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Matsui Securities (1 is a bit unpleasant!) that you should be aware of before investing. 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.