MINISTOP (TSE:9946) Has Affirmed Its Dividend Of ¥10.00

The board of MINISTOP Co., Ltd. (TSE:9946) has announced that it will pay a dividend of ¥10.00 per share on the 2nd of May. Including this payment, the dividend yield on the stock will be 1.2%, which is a modest boost for shareholders' returns.

View our latest analysis for MINISTOP

MINISTOP's Distributions May Be Difficult To Sustain

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. MINISTOP is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share is forecast to expand by 38.3% over the next year. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. The healthy cash flows are definitely a good sign though, so we wouldn't panic just yet, especially with the earnings growing.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥45.00 in 2015, and the most recent fiscal year payment was ¥20.00. This works out to be a decline of approximately 7.8% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Company Could Face Some Challenges Growing The Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. We are encouraged to see that MINISTOP has grown earnings per share at 28% per year over the past five years. Even though the company is not profitable, it is growing at a solid clip. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about MINISTOP's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good 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. As an example, we've identified 1 warning sign for MINISTOP that you should be aware of before investing. 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.