SpaceLtd's (TSE:9622) Dividend Will Be Increased To ¥30.00

The board of Space Co.,Ltd. (TSE:9622) has announced that it will be paying its dividend of ¥30.00 on the 28th of March, an increased payment from last year's comparable dividend. This will take the annual payment to 3.6% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for SpaceLtd

SpaceLtd's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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.

Looking forward, earnings per share could rise by 6.1% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 40%, which is in the range that makes us comfortable with the sustainability of the dividend.

SpaceLtd's Dividend Has Lacked Consistency

SpaceLtd has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 6 years was ¥54.00 in 2018, and the most recent fiscal year payment was ¥40.00. This works out to be a decline of approximately 4.9% per year over that time. 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 see if earnings per share is growing. We are encouraged to see that SpaceLtd has grown earnings per share at 6.1% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On SpaceLtd's Dividend

In summary, while it's always good to see the dividend being raised, we don't think SpaceLtd's payments are rock solid. While SpaceLtd is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for SpaceLtd that you should be aware of before investing. Is SpaceLtd 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.