ARCS' (TSE:9948) Dividend Will Be ¥34.00

The board of ARCS Company Limited (TSE:9948) has announced that it will pay a dividend on the 29th of May, with investors receiving ¥34.00 per share. However, the dividend yield of 2.6% is still a decent boost to shareholder returns.

See our latest analysis for ARCS

ARCS' Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, ARCS was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 3.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

ARCS Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥40.00 in 2015 to the most recent total annual payment of ¥68.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

ARCS Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. ARCS has impressed us by growing EPS at 5.5% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for ARCS' prospects of growing its dividend payments in the future.

ARCS Looks Like A Great Dividend Stock

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that ARCS has the makings of a solid income stock moving forward. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in ARCS stock. 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.