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

Rhythm Co.,Ltd. (TSE:7769) will increase its dividend from last year's comparable payment on the 14th of July to ¥73.00. 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 Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite easily covered by RhythmLtd's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 48.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

RhythmLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥73.00. This implies that the company grew its distributions at a yearly rate of about 9.3% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that RhythmLtd has been growing its earnings per share at 49% a year over the past five years. 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.

RhythmLtd Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. For instance, we've picked out 1 warning sign for RhythmLtd that investors should take into consideration. Is RhythmLtd 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.