The board of GMB Corporation (TSE:7214) has announced that it will pay a dividend on the 24th of June, with investors receiving ¥20.00 per share. This will take the dividend yield to an attractive 4.0%, providing a nice boost to shareholder returns.
See our latest analysis for GMB
GMB's Projections Indicate Future Payments May Be Unsustainable
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, GMB's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Earnings per share could rise by 50.2% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 1,025%, which probably can't continue without starting to put some pressure on the balance sheet.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The most recent annual payment of ¥40.00 is about the same as the annual payment 10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
GMB's Dividend Might Lack Growth
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. GMB has seen EPS rising for the last five years, at 50% per annum. EPS has been growing well, but GMB has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think GMB's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for GMB you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your 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.
About TSE:7214
GMB
Manufactures and sells automotive parts in Japan, the United States, South Korea, China, Europe, and internationally.
Good value slight.
