Espec (TSE:6859) Has Announced That It Will Be Increasing Its Dividend To ¥70.00

The board of Espec Corp. (TSE:6859) has announced that it will be paying its dividend of ¥70.00 on the 23rd of June, an increased payment from last year's comparable dividend. This will take the annual payment to 3.4% of the stock price, which is above what most companies in the industry pay.

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Espec'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. The last dividend was quite easily covered by Espec's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 13.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Espec

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥26.00 in 2016, and the most recent fiscal year payment was ¥115.00. This means that it has been growing its distributions at 16% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Espec has been growing its earnings per share at 20% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Espec could prove to be a strong dividend payer.

We Really Like Espec's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Espec that investors should take into consideration. 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.