Joshin Denki (TSE:8173) Is Due To Pay A Dividend Of ¥75.00

Joshin Denki Co., Ltd. (TSE:8173) has announced that it will pay a dividend of ¥75.00 per share on the 28th of June. This means the annual payment is 3.2% of the current stock price, which is above the average for the industry.

View our latest analysis for Joshin Denki

Joshin Denki's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, based ont he last payment, Joshin Denki was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Unless the company can turn things around, EPS could fall by 3.7% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 45%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Joshin Denki Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥32.00, compared to the most recent full-year payment of ¥75.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.9% 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's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Joshin Denki has seen earnings per share falling at 3.7% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Joshin Denki's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Joshin Denki's payments, as there could be some issues with sustaining them into the future. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Joshin Denki has been making. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Joshin Denki that investors should take into consideration. Is Joshin Denki not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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