MODEC, Inc. (TSE:6269) will pay a dividend of ¥30.00 on the 28th of March. Although the dividend is now higher, the yield is only 1.4%, which is below the industry average.
View our latest analysis for MODEC
MODEC's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. However, MODEC's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share is forecast to rise by 4.7% over the next year. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was ¥30.00, 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 2.9% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
MODEC May Find It Hard To Grow The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that MODEC's earnings per share has fallen at approximately 3.8% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Our Thoughts On MODEC's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 MODEC that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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:6269
MODEC
A general contractor, engages in the engineering, procurement, construction, and installation of floating production systems worldwide.
Solid track record with adequate balance sheet and pays a dividend.
