Marumae (TSE:6264) Will Pay A Larger Dividend Than Last Year At ¥20.00

Marumae Co., Ltd.'s (TSE:6264) dividend will be increasing from last year's payment of the same period to ¥20.00 on 25th of November. Even though the dividend went up, the yield is still quite low at only 1.4%.

See our latest analysis for Marumae

Marumae Is Paying Out More Than It Is Earning

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Marumae's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, EPS could fall by 18.8% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 319%, which could put the dividend in jeopardy if the company's earnings don't improve.

Marumae's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2021, the annual payment back then was ¥22.00, compared to the most recent full-year payment of ¥30.00. This means that it has been growing its distributions at 11% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Potential Is Shaky

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. Over the past five years, it looks as though Marumae's EPS has declined at around 19% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for Marumae that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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