Chuetsu Pulp & Paper (TSE:3877) Will Pay A Dividend Of ¥30.00

Chuetsu Pulp & Paper Co., Ltd.'s (TSE:3877) investors are due to receive a payment of ¥30.00 per share on 2nd of December. This means the annual payment is 4.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Chuetsu Pulp & Paper

Chuetsu Pulp & Paper's Payment Has 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, Chuetsu Pulp & Paper was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 18.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥40.00 in 2014, and the most recent fiscal year payment was ¥60.00. This means that it has been growing its distributions at 4.1% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Chuetsu Pulp & Paper has seen EPS rising for the last five years, at 19% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Chuetsu Pulp & Paper Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Chuetsu Pulp & Paper might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Chuetsu Pulp & Paper that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.