The board of STrust Co.,Ltd. (TSE:3280) has announced that the dividend on 13th of November will be increased to ¥12.00, which will be 9.1% higher than last year's payment of ¥11.00 which covered the same period. This will take the annual payment to 3.1% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for STrustLtd
STrustLtd's Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, STrustLtd was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
EPS is set to fall by 3.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 22%, which is definitely feasible to continue.
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. The annual payment during the last 10 years was ¥4.00 in 2014, and the most recent fiscal year payment was ¥22.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
STrustLtd May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. STrustLtd has seen earnings per share falling at 3.4% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
Our Thoughts On STrustLtd's Dividend
Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. 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.
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 identified 3 warning signs for STrustLtd (2 are potentially serious!) that you should be aware of before investing. 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.
About TSE:3280
Solid track record average dividend payer.
