SK-ElectronicsLTD (TSE:6677) Is Paying Out A Larger Dividend Than Last Year

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 takes the dividend yield to 5.0%, which shareholders will be pleased with.

Our free stock report includes 2 warning signs investors should be aware of before investing in SK-ElectronicsLTD. Read for free now.

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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, SK-ElectronicsLTD was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 17.7% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 61%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View 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. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See SK-ElectronicsLTD's Dividend Growing

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. It's encouraging to see that SK-ElectronicsLTD has been growing its earnings per share at 7.6% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, we always like to see the dividend being raised, but we don't think SK-ElectronicsLTD will make a great income stock. While SK-ElectronicsLTD is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, SK-ElectronicsLTD has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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