Sakata Seed (TSE:1377) Will Pay A Dividend Of ¥30.00

Sakata Seed Corporation (TSE:1377) will pay a dividend of ¥30.00 on the 2nd of September. This means that the annual payment will be 1.6% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Sakata Seed

Sakata Seed's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Sakata Seed was paying a whopping 193% as a dividend, but this only made up 32% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 30.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sakata Seed Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥60.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See Sakata Seed's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Sakata Seed has impressed us by growing EPS at 7.9% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Sakata Seed is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Sakata Seed that investors should know about before committing capital to this stock. 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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