Morio Denki (TSE:6647) Is Paying Out A Dividend Of ¥50.00

Morio Denki Co., Ltd. (TSE:6647) has announced that it will pay a dividend of ¥50.00 per share on the 28th of June. This makes the dividend yield 3.2%, which will augment investor returns quite nicely.

See our latest analysis for Morio Denki

Morio Denki's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Morio Denki's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, EPS could fall by 2.1% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 49%, which is definitely feasible to continue.

Morio Denki's Dividend Has Lacked Consistency

Looking back, Morio Denki's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2016, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥50.00. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

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. It's not great to see that Morio Denki's earnings per share has fallen at approximately 2.1% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Morio Denki's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Morio Denki is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Morio Denki that investors should know about before committing capital to this stock. Is Morio Denki 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.