Seiko Epson (TSE:6724) Has Affirmed Its Dividend Of ¥37.00

The board of Seiko Epson Corporation (TSE:6724) has announced that it will pay a dividend of ¥37.00 per share on the 29th of June. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.

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Seiko Epson's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Seiko Epson was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 91% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share is forecast to rise by 7.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Seiko Epson

Seiko Epson Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥57.50 total annually to ¥74.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

We Could See Seiko Epson's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. Seiko Epson has seen EPS rising for the last five years, at 5.7% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Seiko Epson is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Seiko Epson that you should be aware of before investing. 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.