St.Cousair (TSE:2937) Will Pay A Dividend Of ¥35.00

St.Cousair Co., Ltd.'s (TSE:2937) investors are due to receive a payment of ¥35.00 per share on 24th of June. This means the annual payment is 2.2% of the current stock price, which is above the average for the industry.

See our latest analysis for St.Cousair

St.Cousair's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, St.Cousair's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 112% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to grow by 3.9% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 79%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

St.Cousair Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The annual payment during the last 2 years was ¥33.00 in 2023, and the most recent fiscal year payment was ¥35.00. This implies that the company grew its distributions at a yearly rate of about 3.0% over that duration. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, St.Cousair has only grown its earnings per share at 3.9% per annum over the past five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

St.Cousair's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 5 warning signs for St.Cousair (of which 1 can't be ignored!) you should know about. 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.