Sakai Heavy Industries (TSE:6358) Has Announced A Dividend Of ¥60.00

Sakai Heavy Industries, Ltd. (TSE:6358) will pay a dividend of ¥60.00 on the 30th of June. This means the annual payment is 5.1% of the current stock price, which is above the average for the industry.

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Sakai Heavy Industries' 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. Based on the last payment, the dividend made up 91% of cash flows, but a higher proportion of net income. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

Over the next year, EPS is forecast to expand by 22.7%. If the dividend continues on its recent course, the payout ratio in 12 months could be 150%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Sakai Heavy Industries

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. Since 2015, the dividend has gone from ¥25.00 total annually to ¥105.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year 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.

Sakai Heavy Industries' Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Sakai Heavy Industries has impressed us by growing EPS at 24% per year over the past five years. EPS has been growing well, but Sakai Heavy Industries has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Sakai Heavy Industries' Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. Strong earnings growth means Sakai Heavy Industries has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

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. For example, we've identified 2 warning signs for Sakai Heavy Industries (1 is significant!) that you should be aware of before investing. Is Sakai Heavy Industries 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.