Gakujo's (TSE:2301) Dividend Will Be ¥34.00

Gakujo Co., Ltd. (TSE:2301) will pay a dividend of ¥34.00 on the 27th of January. The dividend yield of 3.9% is still a nice boost to shareholder returns, despite the cut.

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Gakujo's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Gakujo was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 13.1% over the next year. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Gakujo

Gakujo Doesn't Have A Long Payment History

Gakujo's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 8 years was ¥32.00 in 2017, and the most recent fiscal year payment was ¥67.00. This means that it has been growing its distributions at 9.7% per annum over that time. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider Gakujo to be a consistent dividend paying stock.

Gakujo May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Gakujo's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 1.8% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Gakujo's Dividend

Overall, we think that Gakujo could make a reasonable income stock, even though it did cut the dividend this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Gakujo that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.