Innotech's (TSE:9880) Dividend Will Be ¥35.00

Innotech Corporation's (TSE:9880) investors are due to receive a payment of ¥35.00 per share on 26th of June. Based on this payment, the dividend yield on the company's stock will be 5.0%, which is an attractive boost to shareholder returns.

See our latest analysis for Innotech

Innotech's Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Innotech's dividend was only 43% of earnings, however it was paying out 100% 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 fall by 0.4% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 100%, which could put the dividend in jeopardy if the company's earnings don't improve.

Innotech Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥14.00 in 2014, and the most recent fiscal year payment was ¥70.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. However, Innotech's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Innotech's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Innotech's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Innotech that investors need to be conscious of moving forward. Is Innotech 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.