STrust Co.,Ltd. (TSE:3280) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of May to ¥14.00. This makes the dividend yield 3.2%, which is above the industry average.
Check out our latest analysis for STrustLtd
STrustLtd's Future Dividend Projections Appear Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, STrustLtd's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Over the next year, EPS could expand by 30.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.
STrustLtd Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥8.00 in 2015, and the most recent fiscal year payment was ¥24.00. This means that it has been growing its distributions at 12% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that STrustLtd has been growing its earnings per share at 31% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Our Thoughts On STrustLtd's Dividend
Overall, we always like to see the dividend being raised, but we don't think STrustLtd will make a great income stock. While STrustLtd is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for STrustLtd (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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 with adequate balance sheet and pays a dividend.
