SCAT Inc.'s (TSE:3974) investors are due to receive a payment of ¥6.00 per share on 11th of July. This takes the dividend yield to 2.3%, which shareholders will be pleased with.
Check out our latest analysis for SCAT
SCAT's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, SCAT's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 23.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.
SCAT's Dividend Has Lacked Consistency
SCAT has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 6 years was ¥6.67 in 2018, and the most recent fiscal year payment was ¥11.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that SCAT has been growing its earnings per share at 24% 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 SCAT's Dividend
Overall, a dividend increase is always good, and we think that SCAT is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, SCAT has 2 warning signs (and 1 which is a bit unpleasant) 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:3974
Flawless balance sheet moderate.
