SCREEN Holdings (TSE:7735) Has Announced A Dividend Of ¥123.00

SCREEN Holdings Co., Ltd. (TSE:7735) has announced that it will pay a dividend of ¥123.00 per share on the 2nd of December. This will take the annual payment to 2.0% of the stock price, which is above what most companies in the industry pay.

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SCREEN Holdings' Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, SCREEN Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 5.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

View our latest analysis for SCREEN Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥12.50 total annually to ¥280.00. This works out to be a compound annual growth rate (CAGR) of approximately 36% a year 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. It's encouraging to see that SCREEN Holdings has been growing its earnings per share at 58% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like SCREEN Holdings' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for SCREEN Holdings that investors need to be conscious of moving forward. 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.