GSI Creos (TSE:8101) Will Pay A Larger Dividend Than Last Year At ¥90.00

GSI Creos Corporation (TSE:8101) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of June to ¥90.00. This makes the dividend yield 4.3%, which is above the industry average.

View our latest analysis for GSI Creos

GSI Creos' 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. Based on the last dividend, GSI Creos is earning enough to cover the payment, but then it makes up 6,904% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS could expand by 15.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 60% by next year, which is in a pretty sustainable range.

GSI Creos Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥10.00 in 2014, and the most recent fiscal year payment was ¥90.00. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that GSI Creos has grown earnings per share at 15% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On GSI Creos' Dividend

Overall, we always like to see the dividend being raised, but we don't think GSI Creos will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for GSI Creos that investors should know about before committing capital to this stock. Is GSI Creos 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.