Morito's (TSE:9837) Upcoming Dividend Will Be Larger Than Last Year's

Morito Co., Ltd. (TSE:9837) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of March to ¥36.00. This takes the dividend yield to 4.5%, which shareholders will be pleased with.

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Morito's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Morito's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to fall by 14.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 68%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Check out our latest analysis for Morito

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ¥12.00 total annually to ¥69.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Morito has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Morito has impressed us by growing EPS at 29% per year over the past five years. Morito is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Morito Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Morito (of which 1 makes us a bit uncomfortable!) you should know about. 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.