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 on the 3rd of June, with investors receiving ¥100.00 per share. This will take the dividend yield to an attractive 3.9%, providing a nice boost to shareholder returns.

Check out our latest analysis for EIZO

EIZO's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, EIZO's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 20.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 66%, which is in the range that makes us comfortable with the sustainability of the dividend.

EIZO Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥50.00 total annually to ¥200.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

EIZO May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 3.7% a year for the past five years, which isn't massive but still better than seeing them shrink. 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

In summary, while it's always good to see the dividend being raised, we don't think EIZO's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for EIZO that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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