Sun-Wa Technos (TSE:8137) Has Announced A Dividend Of ¥60.00

The board of Sun-Wa Technos Corporation (TSE:8137) has announced that it will pay a dividend on the 2nd of December, with investors receiving ¥60.00 per share. This takes the dividend yield to 4.7%, which shareholders will be pleased with.

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Estimates Indicate Sun-Wa Technos' Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Sun-Wa Technos was paying out 80% of earnings, but a comparatively small 20% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in 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. Assuming the dividend continues along recent trends, we think the payout ratio could reach 99%, which probably can't continue without starting to put some pressure on the balance sheet.

Check out our latest analysis for Sun-Wa Technos

Sun-Wa Technos Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥24.00 in 2015 to the most recent total annual payment of ¥120.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Sun-Wa Technos Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Sun-Wa Technos has seen EPS rising for the last five years, at 11% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Sun-Wa Technos' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. With a reasonable track record and good earnings coverage, the payments look sustainable. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Sun-Wa Technos that investors need to be conscious of moving forward. 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.