EIZO (TSE:6737) Will Pay A Dividend Of ¥55.00

The board of EIZO Corporation (TSE:6737) has announced that it will pay a dividend on the 2nd of June, with investors receiving ¥55.00 per share. This will take the dividend yield to an attractive 4.9%, providing a nice boost to shareholder returns.

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EIZO's Projections Indicate Future Payments May Be Unsustainable

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Over the next year, EPS is forecast to expand by 8.3%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 103% over the next year.

View our latest analysis for EIZO

EIZO Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥30.00 total annually to ¥110.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately, EIZO's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The earnings growth is anaemic, and the company is paying out 101% of its profit. This gives limited room for the company to raise the dividend in the future.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think EIZO will make a great income stock. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think EIZO is a great stock to add to your portfolio if income is your focus.

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. To that end, EIZO has 2 warning signs (and 1 which is significant) we think you should know about. Is EIZO not quite the opportunity you were looking for? Why not check out our selection of top 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.