SCAT (TSE:3974) Is Due To Pay A Dividend Of ¥7.00

SCAT Inc. (TSE:3974) has announced that it will pay a dividend of ¥7.00 per share on the 11th of July. This will take the dividend yield to an attractive 3.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for SCAT

SCAT's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, SCAT was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, EPS could fall by 7.0% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 53%, which is definitely feasible to continue.

SCAT's Dividend Has Lacked Consistency

SCAT has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of ¥6.67 in 2018 to the most recent total annual payment of ¥13.00. This means that it has been growing its distributions at 10% 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.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. SCAT has seen earnings per share falling at 7.0% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

Overall, we always like to see the dividend being raised, but we don't think SCAT will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. Just as an example, we've come across 4 warning signs for SCAT you should be aware of, and 2 of them are concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.