EIZO (TSE:6737) Is Due To Pay A Dividend Of ¥100.00

The board of EIZO Corporation (TSE:6737) has announced that it will pay a dividend of ¥100.00 per share on the 3rd of June. This takes the dividend yield to 3.9%, which shareholders will be pleased with.

See our latest analysis for EIZO

EIZO's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, EIZO's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 20.6% over the next year. If the dividend continues on this path, the payout ratio could be 66% by next year, which we think can be pretty sustainable going forward.

EIZO Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥50.00 in 2014, and the most recent fiscal year payment was ¥200.00. This means that it has been growing its distributions at 15% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

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 per share has been crawling upwards at 3.7% per year. The company has been growing at a pretty soft 3.7% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think EIZO will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for EIZO that investors need to be conscious of moving forward. 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.