Sun-Wa Technos' (TSE:8137) Dividend Will Be ¥50.00

Sun-Wa Technos Corporation (TSE:8137) has announced that it will pay a dividend of ¥50.00 per share on the 12th of June. The yield is still above the industry average at 4.9%.

View our latest analysis for Sun-Wa Technos

Sun-Wa Technos' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Sun-Wa Technos is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 13.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Sun-Wa Technos Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥115.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Sun-Wa Technos has impressed us by growing EPS at 13% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Sun-Wa Technos' prospects of growing its dividend payments in the future.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Sun-Wa Technos that investors should know about before committing capital to this stock. Is Sun-Wa Technos 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.