The board of STrust Co.,Ltd. (TSE:3280) has announced that it will pay a dividend of ¥11.00 per share on the 29th of May. Based on this payment, the dividend yield on the company's stock will be 3.4%, which is an attractive boost to shareholder returns.
View our latest analysis for STrustLtd
STrustLtd's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, STrustLtd was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
EPS is set to fall by 0.7% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 24%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
STrustLtd Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥3.33, compared to the most recent full-year payment of ¥22.00. This means that it has been growing its distributions at 21% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Although it's important to note that STrustLtd's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, STrustLtd has 4 warning signs (and 2 which are concerning) we think you should know about. Is STrustLtd 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:3280
Solid track record average dividend payer.
