SK-ElectronicsLTD's (TSE:6677) Dividend Will Be Increased 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 annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, SK-ElectronicsLTD was earning enough to cover the dividend, but free cash flows weren't positive. 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.

EPS is set to fall by 8.2% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 55%, which is comfortable for the company to continue in the future.

Check out 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. Since 2015, the annual payment back then was ¥15.00, compared to the most recent full-year payment of ¥124.00. This means that it has been growing its distributions at 24% per annum over that time. 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.

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. With a decent amount of growth and a low payout ratio, we think this bodes well for SK-ElectronicsLTD's prospects of growing its dividend payments in the future.

Our Thoughts On SK-ElectronicsLTD's Dividend

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 SK-ElectronicsLTD is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, SK-ElectronicsLTD has 3 warning signs (and 2 which are potentially serious) we think you should know about. 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.