Baroque Japan (TSE:3548) Is Paying Out A Dividend Of ¥38.00

The board of Baroque Japan Limited (TSE:3548) has announced that it will pay a dividend of ¥38.00 per share on the 2nd of June. Based on this payment, the dividend yield on the company's stock will be 4.8%, which is an attractive boost to shareholder returns.

See our latest analysis for Baroque Japan

Baroque Japan Might Find It Hard To Continue The Dividend

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Despite not generating a profit, Baroque Japan is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share could 32.7% over the next year if the trend of the last few years can't be broken. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Baroque Japan Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 8 years was ¥10.00 in 2017, and the most recent fiscal year payment was ¥38.00. This means that it has been growing its distributions at 18% per annum over that time. 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.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Baroque Japan's EPS has declined at around 33% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of Baroque Japan's Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, the dividend is not reliable enough to make this a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Baroque Japan that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.