Pasona Group Inc. (TSE:2168) has announced that it will pay a dividend of ¥35.00 per share on the 10th of August. Based on this payment, the dividend yield will be 1.2%, which is fairly typical for the industry.
View our latest analysis for Pasona Group
Pasona Group's Earnings Easily Cover The Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Pasona Group was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to fall by 35.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 69%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Pasona Group Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥10.00 total annually to ¥35.00. This means that it has been growing its distributions at 13% per annum over that time. 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 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. Pasona Group has seen EPS rising for the last five years, at 19% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Pasona Group is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Pasona Group (of which 2 don't sit too well with us!) you should know about. Is Pasona Group 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.
About TSE:2168
Pasona Group
Engages in the provision of human resources, temporary staffing, and contracting and outsourcing services in Japan.
Solid track record with excellent balance sheet.
