SMK (TSE:6798) Is Paying Out A Dividend Of ¥50.00

The board of SMK Corporation (TSE:6798) has announced that it will pay a dividend on the 20th of November, with investors receiving ¥50.00 per share. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.

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SMK's Distributions May Be Difficult To Sustain

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

Over the next year, EPS might fall by 23.3% based on recent performance. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

Check out our latest analysis for SMK

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The most recent annual payment of ¥100.00 is about the same as the annual payment 10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though SMK's EPS has declined at around 23% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of SMK's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help SMK make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this 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. Just as an example, we've come across 3 warning signs for SMK you should be aware of, and 2 of them shouldn't be ignored. Is SMK 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.