Stella Chemifa (TSE:4109) Will Pay A Dividend Of ¥85.00

Stella Chemifa Corporation's (TSE:4109) investors are due to receive a payment of ¥85.00 per share on 2nd of December. This will take the annual payment to 4.1% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Stella Chemifa

Stella Chemifa's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Stella Chemifa was paying out a very large proportion of what it was earning and 244% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

The next 12 months is set to see EPS grow by 23.5%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 98% over the next year.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥38.00 total annually to ¥170.00. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Stella Chemifa has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

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. Stella Chemifa hasn't seen much change in its earnings per share over the last five years.

Stella Chemifa's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Stella Chemifa will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

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. For example, we've picked out 1 warning sign for Stella Chemifa that investors should know about before committing capital to this stock. 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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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.