e-Seikatsu Co.,Ltd. (TSE:3796) has announced that it will pay a dividend of ¥5.00 per share on the 24th of June. The dividend yield is 1.0% based on this payment, which is a little bit low compared to the other companies in the industry.
View our latest analysis for e-SeikatsuLtd
e-SeikatsuLtd's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, e-SeikatsuLtd's dividend was only 23% of earnings, however it was paying out 119% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
If the trend of the last few years continues, EPS will grow by 42.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥11.00 in 2014, and the most recent fiscal year payment was ¥5.00. This works out to be a decline of approximately 7.6% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. e-SeikatsuLtd has seen EPS rising for the last five years, at 42% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good 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 example, we've picked out 1 warning sign for e-SeikatsuLtd that investors should know about before committing capital to this stock. 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.
About TSE:3796
Flawless balance sheet slight.
