The board of SUNNY SIDE UP GROUP Inc. (TSE:2180) has announced that it will pay a dividend on the 11th of March, with investors receiving ¥7.00 per share. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.
See our latest analysis for SUNNY SIDE UP GROUP
SUNNY SIDE UP GROUP's Payment Could Potentially Have Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, SUNNY SIDE UP GROUP'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.
Looking forward, earnings per share could rise by 5.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut 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 ¥22.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% 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.
We Could See SUNNY SIDE UP GROUP's Dividend Growing
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that SUNNY SIDE UP GROUP has been growing its earnings per share at 5.8% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Our Thoughts On SUNNY SIDE UP GROUP's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for SUNNY SIDE UP GROUP that investors should know about before committing capital to this stock. 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.
About TSE:2180
Flawless balance sheet with solid track record and pays a dividend.
