Ishihara Sangyo KaishaLtd's (TSE:4028) Upcoming Dividend Will Be Larger Than Last Year's

Ishihara Sangyo Kaisha,Ltd. (TSE:4028) has announced that it will be increasing its periodic dividend on the 27th of June to ¥85.00, which will be 21% higher than last year's comparable payment amount of ¥70.00. This makes the dividend yield 4.1%, which is above the industry average.

View our latest analysis for Ishihara Sangyo KaishaLtd

Ishihara Sangyo KaishaLtd'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. Before making this announcement, Ishihara Sangyo KaishaLtd was paying a whopping 140% as a dividend, but this only made up 39% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

The next year is set to see EPS grow by 24.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

Ishihara Sangyo KaishaLtd Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of ¥12.00 in 2019 to the most recent total annual payment of ¥70.00. This means that it has been growing its distributions at 34% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

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. We are encouraged to see that Ishihara Sangyo KaishaLtd has grown earnings per share at 18% per year over the past five years. Ishihara Sangyo KaishaLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Ishihara Sangyo KaishaLtd is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've picked out 2 warning signs for Ishihara Sangyo KaishaLtd that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.