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 dividend yield to an attractive 4.3%, providing a nice boost to shareholder returns.
Check out our latest analysis for Globeride
Globeride's Payment Could Potentially Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 786% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Looking forward, earnings per share is forecast to rise by 11.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.
Globeride Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was ¥17.50, compared to the most recent full-year payment of ¥80.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year 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
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Globeride has grown earnings per share at 10% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Globeride's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Globeride that you should be aware of before investing. Is Globeride 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.
About TSE:7990
Flawless balance sheet established dividend payer.
