CK SAN-ETSU (TSE:5757) Has Announced A Dividend Of ¥45.00

CK SAN-ETSU Co., Ltd.'s (TSE:5757) investors are due to receive a payment of ¥45.00 per share on 29th of June. Including this payment, the dividend yield on the stock will be 2.3%, which is a modest boost for shareholders' returns.

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CK SAN-ETSU's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, CK SAN-ETSU was paying a whopping 544% as a dividend, but this only made up 18% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share could rise by 29.7% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for CK SAN-ETSU

CK SAN-ETSU's Dividend Has Lacked Consistency

It's comforting to see that CK SAN-ETSU has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥90.00. This means that it has been growing its distributions at 18% per annum over that time. CK SAN-ETSU has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. CK SAN-ETSU has seen EPS rising for the last five years, at 30% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While CK SAN-ETSU is earning enough to cover the payments, the cash flows are lacking. We don't think CK SAN-ETSU is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 CK SAN-ETSU that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.