Tanabe Consulting GroupLtd (TSE:9644) Has Announced A Dividend Of ¥14.00

The board of Tanabe Consulting Group Co.,Ltd. (TSE:9644) has announced that it will pay a dividend of ¥14.00 per share on the 26th of June. The yield is still above the industry average at 3.7%.

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Tanabe Consulting GroupLtd's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Tanabe Consulting GroupLtd's was paying out quite a large proportion of earnings and 78% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Over the next year, EPS could expand by 16.4% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Check out our latest analysis for Tanabe Consulting GroupLtd

Tanabe Consulting GroupLtd Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2019, the annual payment back then was ¥10.75, compared to the most recent full-year payment of ¥26.00. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. Tanabe Consulting GroupLtd has impressed us by growing EPS at 16% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We don't think Tanabe Consulting GroupLtd is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in Tanabe Consulting GroupLtd in our latest insider ownership analysis. Is Tanabe Consulting GroupLtd 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.