Careerlink's (TSE:6070) Dividend Will Be ¥120.00

Careerlink Co., Ltd. (TSE:6070) has announced that it will pay a dividend of ¥120.00 per share on the 27th of June. This means the annual payment is 4.9% of the current stock price, which is above the average for the industry.

See our latest analysis for Careerlink

Careerlink's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment was quite easily covered by earnings, but it made up 97% of 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.

If the trend of the last few years continues, EPS will grow by 41.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 57% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥7.00 in 2014 to the most recent total annual payment of ¥120.00. This works out to be a compound annual growth rate (CAGR) of approximately 33% a year over that time. Careerlink has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. Careerlink has seen EPS rising for the last five years, at 42% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Careerlink could prove to be a strong dividend payer.

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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Careerlink has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is Careerlink 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.