SUNNY SIDE UP GROUP (TSE:2180) Has Affirmed Its Dividend Of ¥15.00

SUNNY SIDE UP GROUP Inc. (TSE:2180) has announced that it will pay a dividend of ¥15.00 per share on the 27th of September. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.

View our latest analysis for SUNNY SIDE UP GROUP

SUNNY SIDE UP GROUP's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, SUNNY SIDE UP GROUP'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.

If the trend of the last few years continues, EPS will grow by 7.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 26%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥5.00 in 2014, and the most recent fiscal year payment was ¥30.00. This means that it has been growing its distributions at 20% 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.

We Could See SUNNY SIDE UP GROUP's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that SUNNY SIDE UP GROUP has been growing its earnings per share at 7.3% a year over the past five years. SUNNY SIDE UP GROUP definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we think SUNNY SIDE UP GROUP is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for SUNNY SIDE UP GROUP that investors should take into consideration. Is SUNNY SIDE UP GROUP 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.