Riso Kyoiku (TSE:4714) Is Paying Out A Dividend Of ¥10.00

Riso Kyoiku Co., Ltd. (TSE:4714) will pay a dividend of ¥10.00 on the 12th of May. This means the annual payment is 3.4% of the current stock price, which is above the average for the industry.

View our latest analysis for Riso Kyoiku

Riso Kyoiku's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 90% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 10.4%. If the dividend continues along recent trends, we estimate the payout ratio could reach 93%, which is on the higher side, but certainly still feasible.

Riso Kyoiku's Dividend Has Lacked Consistency

Riso Kyoiku has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the annual payment back then was ¥3.33, compared to the most recent full-year payment of ¥10.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Riso Kyoiku 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.

Riso Kyoiku May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Although it's important to note that Riso Kyoiku's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

We should note that Riso Kyoiku has issued stock equal to 10% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Riso Kyoiku that investors should know about before committing capital to this 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.