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

Innotech Corporation (TSE:9880) has announced that it will pay a dividend of ¥35.00 per share on the 26th of June. The dividend yield will be 5.0% based on this payment which is still above the industry average.

Check out our latest analysis for Innotech

Innotech's Projections Indicate Future Payments May Be Unsustainable

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Innotech's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 100% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

If the company can't turn things around, EPS could fall by 0.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 101%, which could put the dividend under pressure if earnings don't start to improve.

Innotech Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥14.00 total annually to ¥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.

Innotech May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Although it's important to note that Innotech's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Innotech's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for Innotech that investors should know about before committing capital to this stock. Is Innotech not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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