Sumitomo Seika Chemicals Company (TSE:4008) Has Affirmed Its Dividend Of ¥100.00

Sumitomo Seika Chemicals Company, Limited. (TSE:4008) has announced that it will pay a dividend of ¥100.00 per share on the 9th of June. This makes the dividend yield 4.2%, which will augment investor returns quite nicely.

View our latest analysis for Sumitomo Seika Chemicals Company

Sumitomo Seika Chemicals Company's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Sumitomo Seika Chemicals Company is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 15.9% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Sumitomo Seika Chemicals Company Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥50.00 in 2014, and the most recent fiscal year payment was ¥200.00. This means that it has been growing its distributions at 15% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

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. Sumitomo Seika Chemicals Company has impressed us by growing EPS at 16% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Sumitomo Seika Chemicals Company's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Sumitomo Seika Chemicals Company that you should be aware of before investing. Is Sumitomo Seika Chemicals Company 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.