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

Suzuden Corporation (TSE:7480) has announced that on 8th of December, it will be paying a dividend of¥36.00, which a reduction from last year's comparable dividend. The dividend yield of 4.8% is still a nice boost to shareholder returns, despite the cut.

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Suzuden's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Suzuden was paying out 81% of earnings, but a comparatively small 30% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share could rise by 10.6% over the next year if things go the same way as they have for the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 83%, which is on the higher side, but certainly still feasible.

Check out our latest analysis for Suzuden

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 annual payment during the last 10 years was ¥35.00 in 2015, and the most recent fiscal year payment was ¥82.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.9% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Suzuden might have put its house in order since then, but we remain cautious.

Suzuden Might Find It Hard To 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 11% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Suzuden that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.