Godo Steel (TSE:5410) Will Pay A Dividend Of ¥100.00

Godo Steel, Ltd. (TSE:5410) has announced that it will pay a dividend of ¥100.00 per share on the 2nd of December. This means the annual payment is 5.2% of the current stock price, which is above the average for the industry.

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Godo Steel's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Godo Steel's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 8.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Godo Steel

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥30.00 in 2015, and the most recent fiscal year payment was ¥200.00. This means that it has been growing its distributions at 21% per annum 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.

The Dividend Has Growth Potential

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. Godo Steel has impressed us by growing EPS at 8.8% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Godo Steel Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Godo Steel that investors should take into consideration. Is Godo Steel not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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