Ushio (TSE:6925) Will Pay A Dividend Of ¥70.00

The board of Ushio Inc. (TSE:6925) has announced that it will pay a dividend of ¥70.00 per share on the 30th of June. This means the annual payment is 2.5% of the current stock price, which is above the average for the industry.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Estimates Indicate Ushio's Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 133% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 52%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share is forecast to rise by 38.7% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 96% over the next year.

Check out our latest analysis for Ushio

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2016, the dividend has gone from ¥24.00 total annually to ¥70.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. 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.

Ushio Might Find It Hard To Grow Its Dividend

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. Ushio has impressed us by growing EPS at 12% per year over the past five years. 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.

Our Thoughts On Ushio's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Ushio's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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 2 warning signs for Ushio that you should be aware of before investing. Is Ushio not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.