The board of Rinnai Corporation (TSE:5947) has announced that it will pay a dividend on the 30th of June, with investors receiving ¥40.00 per share. This will take the annual payment to 2.5% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Rinnai
Rinnai'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. However, prior to this announcement, Rinnai's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 7.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.
Rinnai Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥21.33 in 2014 to the most recent total annual payment of ¥80.00. This means that it has been growing its distributions at 14% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend Looks Likely To Grow
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Rinnai has seen EPS rising for the last five years, at 11% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Rinnai's prospects of growing its dividend payments in the future.
We Really Like Rinnai's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Rinnai analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.
About TSE:5947
Rinnai
Develops, manufactures, and sells heating products in Japan, the United States, Australia, China, South Korea, and Indonesia.
Flawless balance sheet with solid track record and pays a dividend.
