EM Systems' (TSE:4820) Dividend Will Be ¥17.00

The board of EM Systems Co., Ltd. (TSE:4820) has announced that it will pay a dividend of ¥17.00 per share on the 4th of September. This takes the dividend yield to 4.8%, which shareholders will be pleased with.

Our free stock report includes 2 warning signs investors should be aware of before investing in EM Systems. Read for free now.

Estimates Indicate EM Systems' Could Struggle to Maintain Dividend Payments In The Future

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, EM Systems' profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS is forecast to expand by 11.8%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 123%, which probably can't continue without putting some pressure on the balance sheet.

Check out our latest analysis for EM Systems

EM Systems 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 ¥5.63 in 2015, and the most recent fiscal year payment was ¥35.00. This means that it has been growing its distributions at 20% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Could Be Constrained

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. EM Systems has impressed us by growing EPS at 11% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think EM Systems' payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for EM Systems 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.