Marui Group (TSE:8252) Is Due To Pay A Dividend Of ¥53.00

Marui Group Co., Ltd. (TSE:8252) will pay a dividend of ¥53.00 on the 25th of June. This makes the dividend yield 4.2%, which is above the industry average.

View our latest analysis for Marui Group

Marui Group's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. We think that this practice can make the dividend quite risky in the future.

EPS is set to grow by 8.2% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 82% which is a bit high but can definitely be sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥18.00 in 2015, and the most recent fiscal year payment was ¥106.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Marui Group May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Marui Group'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. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Marui Group will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Marui Group (of which 1 shouldn't be ignored!) you should know about. 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.