Sumitomo Realty & Development (TSE:8830) Has Announced A Dividend Of ¥35.00

Sumitomo Realty & Development Co., Ltd. (TSE:8830) will pay a dividend of ¥35.00 on the 30th of June. Even though the dividend went up, the yield is still quite low at only 1.4%.

View our latest analysis for Sumitomo Realty & Development

Sumitomo Realty & Development's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Sumitomo Realty & Development's dividend was only 17% of earnings, however it was paying out 147% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 4.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

Sumitomo Realty & Development Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥20.00 total annually to ¥70.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, Sumitomo Realty & Development has only grown its earnings per share at 4.6% per annum over the past five years. While EPS growth is quite low, Sumitomo Realty & Development has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Sumitomo Realty & Development's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Sumitomo Realty & Development is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Sumitomo Realty & Development that investors should take into consideration. Is Sumitomo Realty & Development not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.