Innotech (TSE:9880) Is Paying Out A Dividend Of ¥35.00

The board of Innotech Corporation (TSE:9880) has announced that it will pay a dividend on the 9th of December, with investors receiving ¥35.00 per share. Based on this payment, the dividend yield on the company's stock will be 4.9%, which is an attractive boost to shareholder returns.

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Innotech's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Innotech's dividend was only 64% of earnings, however it was paying out 178% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

EPS is set to grow by 2.5% over the next year if recent trends continue. 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 Innotech

Innotech Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥70.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 2.5% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 2.5% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Innotech's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Innotech (of which 1 is significant!) you should know about. 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.