RAIZNEXT's (TSE:6379) Dividend Will Be ¥35.00

The board of RAIZNEXT Corporation (TSE:6379) has announced that it will pay a dividend on the 6th of December, with investors receiving ¥35.00 per share. This will take the annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for RAIZNEXT

Estimates Indicate RAIZNEXT's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, RAIZNEXT's dividend was only 46% of earnings, however it was paying out 393% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 6.3% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 96%, which is a bit high and could start applying pressure to the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥30.00 in 2014, and the most recent fiscal year payment was ¥75.00. This means that it has been growing its distributions at 9.6% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. RAIZNEXT might have put its house in order since then, but we remain cautious.

The Dividend Has Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. RAIZNEXT has seen EPS rising for the last five years, at 6.3% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think RAIZNEXT's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. To that end, RAIZNEXT has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.