IDEC (TSE:6652) Has Announced A Dividend Of ¥65.00
IDEC Corporation (TSE:6652) has announced a dividend of ¥65.00 per share, yielding 5.4%, payable on November 25. However, concerns arise as the company may struggle to sustain this payment due to insufficient profits and a projected payout ratio of 163% in 12 months. Despite a history of dividend growth, IDEC's earnings per share have declined by 5.4% annually over the past five years, raising doubts about future dividend increases. Overall, IDEC may not be a strong candidate for income investment due to these financial challenges.
The board of IDEC Corporation (TSE:6652) has announced that it will pay a dividend on the 25th of November, with investors receiving ¥65.00 per share. This makes the dividend yield 5.4%, which will augment investor returns quite nicely.
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IDEC's Future Dividends May Potentially Be At Risk
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
The next 12 months is set to see EPS grow by 40.4%. If the dividend continues on its recent course, the payout ratio in 12 months could be 163%, which is a bit high and could start applying pressure to the balance sheet.
Check out our latest analysis for IDEC
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥130.00. This implies that the company grew its distributions at a yearly rate of about 16% 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.
Dividend Growth May Be Hard To Come By
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that IDEC's earnings per share has fallen at approximately 5.4% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
IDEC's Dividend Doesn't Look Great
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, IDEC has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
