SCREEN Holdings (TSE:7735) Has Announced That Its Dividend Will Be Reduced To ¥100.00

SCREEN Holdings Co., Ltd.'s (TSE:7735) dividend is being reduced from last year's payment covering the same period to ¥100.00 on the 2nd of December. However, the dividend yield of 1.4% is still a decent boost to shareholder returns.

View our latest analysis for SCREEN Holdings

SCREEN Holdings' Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, SCREEN Holdings' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 9.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from ¥7.50 total annually to ¥224.00. This means that it has been growing its distributions at 40% 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.

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. SCREEN Holdings has impressed us by growing EPS at 30% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like SCREEN Holdings' Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like SCREEN Holdings does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. For instance, we've picked out 2 warning signs for SCREEN Holdings that investors should take into consideration. 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.

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