Seiko Epson (TSE:6724) Has Announced A 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 26th of June. This payment means that the dividend yield will be 2.8%, which is around the industry average.

See our latest analysis for Seiko Epson

Seiko Epson's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Seiko Epson's dividend made up quite a large proportion of earnings but only 22% of free cash flows. This leaves plenty of cash for reinvestment into the business.

The next year is set to see EPS grow by 15.3%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 45% which brings it into quite a comfortable range.

Seiko Epson Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from ¥25.00 total annually to ¥74.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 2.6% a year for the past five years, which isn't massive but still better than seeing them shrink. Slow growth and a high payout ratio could mean that Seiko Epson has maxed out the amount that it has been able to pay to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Seiko Epson's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for Seiko Epson for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.