Careerlink (TSE:6070) Has Announced A Dividend Of ¥120.00

The board of Careerlink Co., Ltd. (TSE:6070) has announced that it will pay a dividend on the 27th of June, with investors receiving ¥120.00 per share. This means the annual payment is 5.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Careerlink

Careerlink's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Careerlink's dividend was only 68% of earnings, however it was paying out 97% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share could rise by 32.1% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 66% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥7.00 total annually to ¥120.00. This implies that the company grew its distributions at a yearly rate of about 33% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Careerlink has grown earnings per share at 32% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Careerlink's payments, as there could be some issues with sustaining them into the future. While Careerlink is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Careerlink that investors need to be conscious of moving forward. Is Careerlink not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.