RenaissanceIncorporated (TSE:2378) Has Announced A Dividend Of ¥4.00

The board of Renaissance,Incorporated (TSE:2378) has announced that it will pay a dividend on the 9th of December, with investors receiving ¥4.00 per share. This takes the dividend yield to 1.2%, which shareholders will be pleased with.

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RenaissanceIncorporated'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. Prior to this announcement, RenaissanceIncorporated's dividend was only 26% of earnings, however it was paying out 300% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

EPS is set to fall by 13.7% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 31%, which is definitely feasible to continue.

See our latest analysis for RenaissanceIncorporated

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥17.00, compared to the most recent full-year payment of ¥13.00. This works out to be a decline of approximately 2.6% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though RenaissanceIncorporated's EPS has declined at around 14% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think RenaissanceIncorporated's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. For example, we've picked out 1 warning sign for RenaissanceIncorporated that investors should know about before committing capital to this stock. 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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