Elematec (TSE:2715) Will Pay A Dividend Of ¥40.00

The board of Elematec Corporation (TSE:2715) has announced that it will pay a dividend of ¥40.00 per share on the 4th of December. This makes the dividend yield 5.0%, which will augment investor returns quite nicely.

View our latest analysis for Elematec

Elematec's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Elematec's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 10.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 62% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥27.00 total annually to ¥90.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. Elematec has seen EPS rising for the last five years, at 12% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Elematec's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Elematec that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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