Marui Group (TSE:8252) Is Paying Out A Larger Dividend Than Last Year

The board of Marui Group Co., Ltd. (TSE:8252) has announced that it will be paying its dividend of ¥65.00 on the 4th of December, an increased payment from last year's comparable dividend. This makes the dividend yield 4.0%, which is above the industry average.

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Marui Group's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Marui Group's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to grow by 7.7% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80% - on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Marui Group

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥20.00 in 2015, and the most recent fiscal year payment was ¥131.00. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Marui Group has seen EPS rising for the last five years, at 9.7% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Marui Group's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Marui Group has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. 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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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.