The board of e-Seikatsu Co.,Ltd. (TSE:3796) has announced that it will pay a dividend of ¥5.00 per share on the 27th of June. This payment means the dividend yield will be 1.1%, which is below the average for the industry.
View our latest analysis for e-SeikatsuLtd
e-SeikatsuLtd's Payment Could Potentially Have Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, e-SeikatsuLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share could rise by 29.3% over the next year if the trend from the last few years continues. 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.
e-SeikatsuLtd Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥3.00 in 2014 to the most recent total annual payment of ¥5.00. This means that it has been growing its distributions at 5.2% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. e-SeikatsuLtd has seen EPS rising for the last five years, at 29% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.
Our Thoughts On e-SeikatsuLtd's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, e-SeikatsuLtd has 3 warning signs (and 1 which doesn't sit too well with us) 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.
About TSE:3796
Flawless balance sheet low.
