The board of Sakata Seed Corporation (TSE:1377) has announced that it will pay a dividend of ¥30.00 per share on the 2nd of September. This means that the annual payment will be 1.5% of the current stock price, which is in line with the average for the industry.
View our latest analysis for Sakata Seed
Sakata Seed's Earnings Easily Cover The Distributions
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 175% as a dividend, but this only made up 19% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
The next year is set to see EPS grow by 3.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.
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 ¥20.00, compared to the most recent full-year payment of ¥55.00. This means that it has been growing its distributions at 11% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Has Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Sakata Seed has impressed us by growing EPS at 7.7% 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 Sakata Seed is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Sakata Seed that investors need to be conscious of moving forward. 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.
About TSE:1377
Sakata Seed
Produces and sells vegetable and flower seeds, bulbs, plants, and agricultural and horticultural supplies in Japan and internationally.
Flawless balance sheet and undervalued.
