Osaka Soda (TSE:4046) Will Pay A Dividend Of ¥45.00

The board of Osaka Soda Co., Ltd. (TSE:4046) has announced that it will pay a dividend on the 9th of December, with investors receiving ¥45.00 per share. This payment means the dividend yield will be 1.1%, which is below the average for the industry.

View our latest analysis for Osaka Soda

Osaka Soda's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Osaka Soda's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 24.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥35.00 in 2014 to the most recent total annual payment of ¥95.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Osaka Soda has only grown its earnings per share at 2.6% per annum over the past five years. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Osaka Soda analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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