Citizen Watch's (TSE:7762) Dividend Will Be ¥23.50

Citizen Watch Co., Ltd. (TSE:7762) will pay a dividend of ¥23.50 on the 26th of June. This makes the dividend yield 3.6%, which is above the industry average.

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Citizen Watch's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Citizen Watch was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 0.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 55%, which is comfortable for the company to continue in the future.

View our latest analysis for Citizen Watch

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 ¥16.00 in 2015, and the most recent fiscal year payment was ¥47.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Citizen Watch has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Citizen Watch has seen EPS rising for the last five years, at 47% per annum. Citizen Watch is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Citizen Watch's Dividend

Overall, a dividend increase is always good, and we think that Citizen Watch is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 2 warning signs for Citizen Watch you should be aware of, and 1 of them is concerning. Is Citizen Watch 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.