Seikagaku's (TSE:4548) Dividend Will Be ¥15.00

The board of Seikagaku Corporation (TSE:4548) has announced that it will pay a dividend on the 23rd of June, with investors receiving ¥15.00 per share. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.

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Seikagaku's Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. Despite not generating a profit, Seikagaku is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Recent, EPS has fallen by 29.8%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

View our latest analysis for Seikagaku

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥26.00 total annually to ¥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.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Seikagaku's earnings per share has shrunk at 30% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Seikagaku's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Seikagaku make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Seikagaku that investors should know about before committing capital to this stock. Is Seikagaku not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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