EIZO's (TSE:6737) Dividend Will Be Increased To ¥105.00

EIZO Corporation (TSE:6737) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥105.00. This will take the annual payment to 4.6% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for EIZO

EIZO's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend made up a very large portion of earnings and also represented 87% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

EPS is set to grow by 11.8% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 94% which is a bit high but can definitely be sustainable.

EIZO Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥50.00 in 2014 to the most recent total annual payment of ¥210.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 4.8% per year. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

Our Thoughts On EIZO's Dividend

In summary, while it's always good to see the dividend being raised, we don't think EIZO's payments are rock solid. 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 would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for EIZO 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.