METAWATER's (TSE:9551) Dividend Will Be Increased To ¥24.00

METAWATER Co., Ltd. (TSE:9551) will increase its dividend on the 3rd of June to ¥24.00, which is 9.1% higher than last year's payment from the same period of ¥22.00. This takes the annual payment to 2.0% of the current stock price, which is about average for the industry.

Check out our latest analysis for METAWATER

METAWATER's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. METAWATER is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 12.6%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

METAWATER Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of ¥29.00 in 2015 to the most recent total annual payment of ¥44.00. This means that it has been growing its distributions at 4.7% per annum over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. METAWATER has seen EPS rising for the last five years, at 11% per annum. METAWATER definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On METAWATER's Dividend

Overall, we always like to see the dividend being raised, but we don't think METAWATER will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for METAWATER that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.