Marubeni Construction Material LeaseLtd (TSE:9763) Has Announced A Dividend Of ¥65.00

Marubeni Construction Material Lease Co.,Ltd.'s (TSE:9763) investors are due to receive a payment of ¥65.00 per share on 9th of December. This will take the dividend yield to an attractive 4.4%, providing a nice boost to shareholder returns.

See our latest analysis for Marubeni Construction Material LeaseLtd

Marubeni Construction Material LeaseLtd's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Marubeni Construction Material LeaseLtd's dividend was only 31% of earnings, however it was paying out 247% of free cash flows. While the business may be attempting to set a balanced dividend policy, 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 3.7% if recent trends continue. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Marubeni Construction Material LeaseLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥40.00 in 2014, and the most recent fiscal year payment was ¥130.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.7% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Marubeni Construction Material LeaseLtd could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Marubeni Construction Material LeaseLtd's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Marubeni Construction Material LeaseLtd's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Marubeni Construction Material LeaseLtd that investors should take into consideration. Is Marubeni Construction Material LeaseLtd 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.