Olympus' (TSE:7733) Upcoming Dividend Will Be Larger Than Last Year's

Olympus Corporation's (TSE:7733) dividend will be increasing from last year's payment of the same period to ¥30.00 on 5th of June. This will take the dividend yield to an attractive 1.4%, providing a nice boost to shareholder returns.

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Olympus' Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Olympus was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 90% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

The next year is set to see EPS grow by 12.1%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

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Olympus Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥2.50 in 2015 to the most recent total annual payment of ¥30.00. This means that it has been growing its distributions at 28% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Olympus has impressed us by growing EPS at 22% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Olympus' Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payments look okay by most measures, the lack of cash flow could definitely cause problems for them in the future. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 13 analysts we track are forecasting for Olympus for free with public analyst estimates for the company. Is Olympus not quite the opportunity you were looking for? Why not check out our selection of top 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.