Izumi (TSE:8273) Will Pay A Dividend Of ¥45.00

Izumi Co., Ltd. (TSE:8273) will pay a dividend of ¥45.00 on the 18th of November. This makes the dividend yield 2.6%, which is above the industry average.

View our latest analysis for Izumi

Izumi's Payment Has 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 payment, Izumi was paying only paying out a fraction of earnings, but the payment was a massive 202% of 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.

The next year is set to see EPS grow by 5.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 32%, which is in the range that makes us comfortable with the sustainability of the dividend.

Izumi Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥40.00, compared to the most recent full-year payment of ¥88.00. This means that it has been growing its distributions at 8.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Izumi May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. Over the past five years, it looks as though Izumi's EPS has declined at around 2.7% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Izumi's Dividend

Overall, we always like to see the dividend being raised, but we don't think Izumi will make a great income stock. While Izumi is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Izumi that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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