San-Ai Obbli (TSE:8097) Will Pay A Dividend Of ¥50.00

San-Ai Obbli Co., Ltd.'s (TSE:8097) investors are due to receive a payment of ¥50.00 per share on 8th of December. Based on this payment, the dividend yield on the company's stock will be 5.3%, which is an attractive boost to shareholder returns.

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San-Ai Obbli's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, San-Ai Obbli was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to grow by 3.5% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 81%, which is on the higher side, but certainly still feasible.

See our latest analysis for San-Ai Obbli

San-Ai Obbli Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥16.50 in 2015, and the most recent fiscal year payment was ¥100.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, San-Ai Obbli has only grown its earnings per share at 3.5% per annum over the past five years. Growth of 3.5% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for San-Ai Obbli 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.