Sumitomo Seika Chemicals Company (TSE:4008) Is Paying Out A Dividend Of ¥100.00

The board of Sumitomo Seika Chemicals Company, Limited. (TSE:4008) has announced that it will pay a dividend of ¥100.00 per share on the 5th of December. The dividend yield will be 4.3% based on this payment which is still above the industry average.

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Sumitomo Seika Chemicals Company's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Sumitomo Seika Chemicals Company was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to fall by 3.6% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 67%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

See our latest analysis for Sumitomo Seika Chemicals Company

Sumitomo Seika Chemicals Company 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 ¥75.00 in 2015, and the most recent fiscal year payment was ¥200.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year 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.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. In the last five years, Sumitomo Seika Chemicals Company's earnings per share has shrunk at approximately 3.6% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Sumitomo Seika Chemicals Company's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sumitomo Seika Chemicals Company's payments, as there could be some issues with sustaining them into the future. While Sumitomo Seika Chemicals Company is earning enough to cover the payments, the cash flows are lacking. We don't think Sumitomo Seika Chemicals Company is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Sumitomo Seika Chemicals Company that investors need to be conscious of moving forward. 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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