RAIZNEXT's (TSE:6379) Shareholders Will Receive A Bigger Dividend Than Last Year

RAIZNEXT Corporation's (TSE:6379) dividend will be increasing from last year's payment of the same period to ¥100.00 on 28th of June. Based on this payment, the dividend yield for the company will be 3.0%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that RAIZNEXT's stock price has increased by 60% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for RAIZNEXT

RAIZNEXT Doesn't Earn Enough To Cover Its Payments

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Earnings per share could rise by 1.1% over the next year if things go the same way as they have for the last few years. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 115% over the next year.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥30.00 total annually to ¥70.00. This means that it has been growing its distributions at 8.8% 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. RAIZNEXT hasn't seen much change in its earnings per share over the last five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in 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 payments are bit high to be considered sustainable, and the track record isn't the best. 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. Case in point: We've spotted 3 warning signs for RAIZNEXT (of which 2 can't be ignored!) you should know about. Is RAIZNEXT not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.