Sumitomo Warehouse (TSE:9303) Is Increasing Its Dividend To ¥52.50

The Sumitomo Warehouse Co., Ltd. (TSE:9303) will increase its dividend on the 30th of June to ¥52.50, which is 4.0% higher than last year's payment from the same period of ¥50.50. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.

View our latest analysis for Sumitomo Warehouse

Sumitomo Warehouse's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Sumitomo Warehouse was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Earnings per share is forecast to rise by 3.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 75%, which is on the higher side, but certainly still feasible.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥22.00, compared to the most recent full-year payment of ¥101.00. This means that it has been growing its distributions at 16% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Sumitomo Warehouse Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Sumitomo Warehouse has seen EPS rising for the last five years, at 7.0% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. As an example, we've identified 1 warning sign for Sumitomo Warehouse that you should be aware of before investing. Is Sumitomo Warehouse not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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