Solasto's (TSE:6197) Dividend Will Be ¥11.00

Solasto Corporation (TSE:6197) will pay a dividend of ¥11.00 on the 10th of June. This makes the dividend yield 4.0%, which is above the industry average.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Solasto'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. Before making this announcement, Solasto was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 2.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

See our latest analysis for Solasto

Solasto Is Still Building Its Track Record

It is great to see that Solasto has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the dividend has gone from ¥13.67 total annually to ¥22.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Solasto has been growing its earnings per share at 5.3% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Solasto's prospects of growing its dividend payments in the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for Solasto for free with public analyst estimates for the company. 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.