Sumitomo Realty & Development's (TSE:8830) Dividend Will Be ¥35.00

Sumitomo Realty & Development Co., Ltd.'s (TSE:8830) investors are due to receive a payment of ¥35.00 per share on 30th of June. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.

Check out our latest analysis for Sumitomo Realty & Development

Sumitomo Realty & Development's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Sumitomo Realty & Development was paying a whopping 147% as a dividend, but this only made up 17% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 4.5% over the next year. 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

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 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. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

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. Earnings have grown at around 4.6% a year for the past five years, which isn't massive but still better than seeing them shrink. 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, we always like to see the dividend being raised, but we don't think Sumitomo Realty & Development will make a great income stock. While Sumitomo Realty & Development is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Sumitomo Realty & Development that investors should know about before committing capital to this stock. Is Sumitomo Realty & Development 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.