Zeon's (TSE:4205) Shareholders Will Receive A Bigger Dividend Than Last Year
Zeon Corporation (TSE:4205) will increase its dividend to ¥36.00 on December 3rd, raising the yield to 4.4%. Despite a solid track record of dividend growth, concerns remain about the sustainability of payments due to a lack of free cash flow. Projected EPS growth of 6.5% next year suggests a payout ratio of 59%, which is sustainable. However, the company is not considered a top-tier income stock, and investors should be cautious, considering other factors before investing.
Zeon Corporation (TSE:4205) will increase its dividend from last year's comparable payment on the 3rd of December to ¥36.00. This will take the dividend yield to an attractive 4.4%, providing a nice boost to shareholder returns.
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.
Zeon's Projected Earnings Seem Likely To Cover Future Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Zeon was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
The next year is set to see EPS grow by 6.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 59% by next year, which is in a pretty sustainable range.
Check out our latest analysis for Zeon
Zeon Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥72.00. This means that it has been growing its distributions at 17% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Has Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Zeon has impressed us by growing EPS at 9.8% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
Our Thoughts On Zeon's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Zeon's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
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 1 warning sign for Zeon that you should be aware of before investing. Is Zeon not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
