SB Technology (TSE:4726) Is Paying Out A Larger Dividend Than Last Year

The board of SB Technology Corp. (TSE:4726) has announced that it will be paying its dividend of ¥40.00 on the 20th of June, an increased payment from last year's comparable dividend. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for SB Technology

SB Technology's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, SB Technology was paying a whopping 140% as a dividend, but this only made up 15% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to fall by 37.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 31%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

SB Technology Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥70.00. This means that it has been growing its distributions at 21% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. SB Technology has seen EPS rising for the last five years, at 39% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, we always like to see the dividend being raised, but we don't think SB Technology will make a great income stock. While SB Technology is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for SB Technology (of which 1 is potentially serious!) you should know about. Is SB Technology not quite the opportunity you were looking for? Why not check out our selection of top 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.