Suzuden (TSE:7480) Will Pay A Smaller Dividend Than Last Year

Suzuden Corporation's (TSE:7480) dividend is being reduced from last year's payment covering the same period to ¥39.00 on the 6th of December. However, the dividend yield of 4.8% is still a decent boost to shareholder returns.

See our latest analysis for Suzuden

Suzuden's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Suzuden's dividend made up quite a large proportion of earnings but only 34% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS could expand by 9.2% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 79% which is a bit high but can definitely be sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥89.00. This means that it has been growing its distributions at 24% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Suzuden Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Suzuden has grown earnings per share at 9.2% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Suzuden 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.

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