SpaceLtd (TSE:9622) Will Pay A Dividend Of ¥27.00

The board of Space Co.,Ltd. (TSE:9622) has announced that it will pay a dividend of ¥27.00 per share on the 10th of September. This makes the dividend yield 4.8%, which is above the industry average.

We've discovered 1 warning sign about SpaceLtd. View them for free.

SpaceLtd's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, SpaceLtd was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

If the trend of the last few years continues, EPS will grow by 7.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.

View our latest analysis for SpaceLtd

SpaceLtd's Dividend Has Lacked Consistency

Looking back, SpaceLtd's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The payments haven't really changed that much since 6 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

We Could See SpaceLtd's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. SpaceLtd has impressed us by growing EPS at 7.7% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

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. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments SpaceLtd has been making. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for SpaceLtd that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.