Seikagaku (TSE:4548) Has Affirmed Its Dividend Of ¥15.00

The board of Seikagaku Corporation (TSE:4548) has announced that it will pay a dividend on the 3rd of December, with investors receiving ¥15.00 per share. This makes the dividend yield 4.5%, which will augment investor returns quite nicely.

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Seikagaku's Distributions May Be Difficult To Sustain

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Seikagaku is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

If the trend of the last few years continues, EPS will grow by 2.4% over the next 12 months. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unless this can be done in short order, the dividend might be difficult to sustain.

See our latest analysis for Seikagaku

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 ¥26.00 in 2015, and the most recent fiscal year payment was ¥30.00. This means that it has been growing its distributions at 1.4% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings have grown at around 2.4% a year for the past five years, which isn't massive but still better than seeing them shrink. With no profits, we don't think Seikagaku has much potential to grow the dividend in the future.

Seikagaku's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Seikagaku is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Seikagaku that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.