SK-ElectronicsLTD (TSE:6677) Has Announced That It Will Be Increasing Its Dividend To ¥128.00

SK-Electronics CO.,LTD. (TSE:6677) will increase its dividend from last year's comparable payment on the 25th of December to ¥128.00. This will take the dividend yield to an attractive 4.3%, providing a nice boost to shareholder returns.

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SK-ElectronicsLTD's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, SK-ElectronicsLTD's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 3.9% over the next year. If the dividend continues on this path, the payout ratio could be 60% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for SK-ElectronicsLTD

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥124.00. This means that it has been growing its distributions at 24% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that SK-ElectronicsLTD has grown earnings per share at 76% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On SK-ElectronicsLTD's Dividend

Overall, we always like to see the dividend being raised, but we don't think SK-ElectronicsLTD 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for SK-ElectronicsLTD that you should be aware of before investing. 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.