Sumitomo Osaka Cement's (TSE:5232) Dividend Will Be ¥60.00

Sumitomo Osaka Cement Co., Ltd. (TSE:5232) has announced that it will pay a dividend of ¥60.00 per share on the 29th of June. This makes the dividend yield 3.1%, which will augment investor returns quite nicely.

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Sumitomo Osaka Cement's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Sumitomo Osaka Cement's dividend was only 29% of earnings, however it was paying out 244% of free cash flows. 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.

The next year is set to see EPS grow by 9.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Sumitomo Osaka Cement

Sumitomo Osaka Cement Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥50.00 in 2015, and the most recent fiscal year payment was ¥120.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Sumitomo Osaka Cement has been growing its earnings per share at 8.9% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sumitomo Osaka Cement's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Sumitomo Osaka Cement that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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