Suzuden's (TSE:7480) Dividend Will Be Reduced To ¥36.00

Suzuden Corporation's (TSE:7480) dividend is being reduced from last year's payment covering the same period to ¥36.00 on the 8th of December. However, the dividend yield of 4.7% is still a decent boost to shareholder returns.

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Suzuden's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Suzuden was paying out 85% of earnings, but a comparatively small 41% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS could expand by 8.5% if the company continues along the path it has been on recently. If the dividend continues along recent trends, we estimate the payout ratio could reach 88%, which is on the higher side, but certainly still feasible.

See 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 dividend has gone from an annual total of ¥35.00 in 2015 to the most recent total annual payment of ¥82.00. This means that it has been growing its distributions at 8.9% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Suzuden Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Suzuden has grown earnings per share at 8.5% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On Suzuden's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Suzuden that investors should take into consideration. 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.