EDION (TSE:2730) Is Due To Pay A Dividend Of ¥23.00

The board of EDION Corporation (TSE:2730) has announced that it will pay a dividend on the 30th of June, with investors receiving ¥23.00 per share. The dividend yield will be 2.5% based on this payment which is still above the industry average.

See our latest analysis for EDION

EDION's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, EDION's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 3.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥20.00 total annually to ¥46.00. This means that it has been growing its distributions at 8.7% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. EDION might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 3.0% per year. If EDION is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On EDION's Dividend

Overall, a consistent dividend is a good thing, and we think that EDION has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for EDION (1 shouldn't be ignored!) 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.