SPK (TSE:7466) Has Announced That It Will Be Increasing Its Dividend To ¥33.00

The board of SPK Corporation (TSE:7466) has announced that it will be paying its dividend of ¥33.00 on the 2nd of December, an increased payment from last year's comparable dividend. This will take the annual payment to 3.1% of the stock price, which is above what most companies in the industry pay.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

SPK's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, SPK's dividend was only 24% of earnings, however it was paying out 259% of free cash flows. 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 could rise by 9.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for SPK

SPK Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥30.00 in 2015, and the most recent fiscal year payment was ¥70.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.8% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. SPK has impressed us by growing EPS at 9.9% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, we always like to see the dividend being raised, but we don't think SPK will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think SPK is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for SPK that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.