SpaceLtd (TSE:9622) Is Increasing Its Dividend To ¥30.00

Space Co.,Ltd. (TSE:9622) will increase its dividend from last year's comparable payment on the 28th of March to ¥30.00. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for SpaceLtd

SpaceLtd's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, based ont he last payment, SpaceLtd was earning enough to cover the dividend pretty comfortably. The business is earning enough to make the dividend feasible, but the cash payout ratio of 79% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

If the trend of the last few years continues, EPS will grow by 6.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

SpaceLtd's Dividend Has Lacked Consistency

SpaceLtd has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the dividend has gone from ¥54.00 total annually to ¥40.00. Doing the maths, this is a decline of about 4.9% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

We Could See SpaceLtd's Dividend Growing

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. SpaceLtd has seen EPS rising for the last five years, at 6.1% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for SpaceLtd's prospects of growing its dividend payments in the future.

Our Thoughts On SpaceLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think SpaceLtd will make a great income stock. While SpaceLtd is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think SpaceLtd is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 1 warning sign for SpaceLtd that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.