Rinko (TSE:9355) Will Pay A Larger Dividend Than Last Year At ¥45.00
Rinko Corporation's (TSE:9355) dividend will be increasing from last year's payment of the same period to ¥45.00 on 30th of June. Based on this payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.
Rinko's Payment Could Potentially Have Solid Earnings Coverage
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. But before making this announcement, Rinko's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.
Over the next year, EPS could expand by 52.0% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 10% by next year, which is in a pretty sustainable range.
See our latest analysis for Rinko
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2016, the dividend has gone from ¥30.00 total annually to ¥45.00. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Rinko has seen EPS rising for the last five years, at 52% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Rinko will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Rinko has been making. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for Rinko you should be aware of, and 1 of them is concerning. Is Rinko 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.