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 4.1%, providing a nice boost to shareholder returns.

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SK-ElectronicsLTD's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, SK-ElectronicsLTD's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 3.7% over the next year. If the dividend continues on this path, the payout ratio could be 61% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for SK-ElectronicsLTD

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥15.00 total annually to ¥128.00. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. SK-ElectronicsLTD has impressed us by growing EPS at 76% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that SK-ElectronicsLTD could prove to be a strong dividend payer.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think SK-ElectronicsLTD's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think SK-ElectronicsLTD is a great stock to add to your portfolio if income is your focus.

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 1 warning sign for SK-ElectronicsLTD that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.