Zeon's (TSE:4205) Shareholders Will Receive A Bigger Dividend Than Last Year

Zeon Corporation (TSE:4205) will increase its dividend from last year's comparable payment on the 3rd of December to ¥36.00. This will take the dividend yield to an attractive 4.4%, providing a nice boost to shareholder returns.

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Zeon's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Zeon 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.

The next year is set to see EPS grow by 6.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 59% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Zeon

Zeon Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥72.00. This means that it has been growing its distributions at 17% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Zeon has impressed us by growing EPS at 9.8% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Zeon's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Zeon's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

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 Zeon that you should be aware of before investing. Is Zeon 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.