Riskmonster.com's (TSE:3768) Dividend Will Be Increased To ¥15.00

Riskmonster.com's (TSE:3768) dividend will be increasing from last year's payment of the same period to ¥15.00 on 10th of June. This will take the annual payment to 3.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Riskmonster.com

Riskmonster.com's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Riskmonster.com's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, could fall by 8.5% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 76%, meaning that most of the company's earnings is being paid out to shareholders.

Riskmonster.com Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥4.25, compared to the most recent full-year payment of ¥15.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Riskmonster.com's EPS has declined at around 8.5% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Riskmonster.com 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Riskmonster.com has 4 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Riskmonster.com 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.