Globeride (TSE:7990) Has Announced A Dividend Of ¥40.00

Globeride, Inc.'s (TSE:7990) investors are due to receive a payment of ¥40.00 per share on 6th of June. This will take the annual payment to 4.1% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Globeride

Globeride's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Globeride's dividend was only 45% of earnings, however it was paying out 786% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to expand by 11.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.

Globeride Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from ¥17.50 total annually to ¥80.00. This means that it has been growing its distributions at 16% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Globeride has been growing its earnings per share at 10% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 2 warning signs for Globeride that investors should take into consideration. 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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