Eisai (TSE:4523) Is Due To Pay A Dividend Of ¥80.00

The board of Eisai Co., Ltd. (TSE:4523) has announced that it will pay a dividend on the 29th of May, with investors receiving ¥80.00 per share. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

See our latest analysis for Eisai

Eisai's Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 112% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

The next 12 months is set to see EPS grow by 10.8%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 100%, which probably can't continue without putting some pressure on the balance sheet.

Eisai Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥150.00 total annually to ¥160.00. Its dividends have grown at less than 1% per annum over this time frame. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. In the last five years, Eisai's earnings per share has shrunk at approximately 6.3% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Eisai that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.