RhythmLtd's (TSE:7769) Shareholders Will Receive A Bigger Dividend Than Last Year

Rhythm Co.,Ltd.'s (TSE:7769) dividend will be increasing from last year's payment of the same period to ¥73.00 on 14th of July. The payment will take the dividend yield to 1.9%, which is in line with the average for the industry.

Check out our latest analysis for RhythmLtd

RhythmLtd's Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. RhythmLtd was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 85% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share could rise by 46.0% 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 53%, which is in the range that makes us comfortable with the sustainability of the dividend.

RhythmLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥30.00 in 2014, and the most recent fiscal year payment was ¥73.00. This means that it has been growing its distributions at 9.3% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. RhythmLtd has seen EPS rising for the last five years, at 46% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that RhythmLtd could prove to be a strong dividend payer.

Our Thoughts On RhythmLtd's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Now, if you want to look closer, it would be worth checking out our free research on RhythmLtd management tenure, salary, and performance. 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.