PCA (TSE:9629) Will Pay A Larger Dividend Than Last Year At ¥95.00

The board of PCA Corporation (TSE:9629) has announced that it will be paying its dividend of ¥95.00 on the 23rd of June, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.0%, which shareholders will be pleased with.

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PCA's Projections Indicate Future Payments May Be Unsustainable

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

EPS is set to grow by 5.2% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 142%, which probably can't continue without starting to put some pressure on the balance sheet.

See our latest analysis for PCA

PCA Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from ¥10.33 total annually to ¥95.00. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

PCA May Have Challenges Growing The Dividend

Investors could be attracted to the stock based on the quality of its payment history. PCA has seen EPS rising for the last five years, at 5.2% per annum. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

PCA's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think PCA will make a great income stock. 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 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for PCA that you should be aware of before investing. 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.