Dentsu Soken (TSE:4812) Is Paying Out A Larger Dividend Than Last Year

Dentsu Soken Inc.'s (TSE:4812) dividend will be increasing from last year's payment of the same period to ¥58.00 on 2nd of September. The payment will take the dividend yield to 1.7%, which is in line with the average for the industry.

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Dentsu Soken's Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Dentsu Soken's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 13.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Dentsu Soken

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥116.00. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Dentsu Soken has grown earnings per share at 18% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Dentsu Soken Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Dentsu Soken analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Dentsu Soken 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.