SBI Global Asset Management (TSE:4765) Is Paying Out A Larger Dividend Than Last Year

The board of SBI Global Asset Management Co., Ltd. (TSE:4765) has announced that the dividend on 3rd of June will be increased to ¥13.25, which will be 1.9% higher than last year's payment of ¥13.00 which covered the same period. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

SBI Global Asset Management's Projections Indicate Future Payments May Be Unsustainable

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS could expand by 4.5% if the company continues along the path it has been on recently. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 131% over the next year.

Check out our latest analysis for SBI Global Asset Management

SBI Global Asset Management Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥4.20 total annually to ¥21.75. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. However, SBI Global Asset Management has only grown its earnings per share at 4.5% per annum over the past five years. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, SBI Global Asset Management has 2 warning signs (and 1 which is potentially serious) we think you should know about. Is SBI Global Asset Management not quite the opportunity you were looking for? Why not check out our selection of top 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.