Ito En's (TSE:2593) Dividend Will Be ¥22.00

Ito En, Ltd. (TSE:2593) will pay a dividend of ¥22.00 on the 29th of July. Even though the dividend went up, the yield is still quite low at only 1.5%.

View our latest analysis for Ito En

Ito En's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Ito En was paying only paying out a fraction of earnings, but the payment was a massive 163% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to expand by 9.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

Ito En Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥38.00 total annually to ¥44.00. This works out to be a compound annual growth rate (CAGR) of approximately 1.5% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Ito En's EPS has declined at around 2.8% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Ito En will make a great income stock. While Ito En is earning enough to cover the payments, the cash flows are lacking. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Are management backing themselves to deliver performance? Check their shareholdings in Ito En in our latest insider ownership analysis. 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.