Socionext's (TSE:6526) Dividend Will Be ¥25.00

The board of Socionext Inc. (TSE:6526) has announced that it will pay a dividend of ¥25.00 per share on the 27th of November. This makes the dividend yield 1.9%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Socionext's stock price has increased by 63% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Socionext'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. The last dividend was quite easily covered by Socionext's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 18.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

See our latest analysis for Socionext

Socionext Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of ¥42.00 in 2023 to the most recent total annual payment of ¥50.00. This means that it has been growing its distributions at 9.1% per annum over that time. Socionext has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Socionext has impressed us by growing EPS at 120% per year over the past five years. Socionext is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Socionext Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 Socionext that investors should know about before committing capital to this stock. Is Socionext 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.