Marui Group's (TSE:8252) Dividend Will Be Increased To ¥53.00

The board of Marui Group Co., Ltd. (TSE:8252) has announced that it will be paying its dividend of ¥53.00 on the 6th of December, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 4.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for Marui Group

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Marui Group's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. We think that this practice can make the dividend quite risky in the future.

Over the next year, EPS is forecast to expand by 6.6%. If the dividend continues along recent trends, we estimate the payout ratio could reach 78%, which is on the higher side, but certainly still feasible.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥18.00, compared to the most recent full-year payment of ¥106.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Marui Group 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. However, Marui Group has only grown its earnings per share at 4.2% per annum over the past five years. Slow growth and a high payout ratio could mean that Marui Group has maxed out the amount that it has been able to pay to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

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. We don't think Marui Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Marui Group has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Marui Group 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.