Ricoh Leasing Company (TSE:8566) Has Announced That It Will Be Increasing Its Dividend To ¥80.00

The board of Ricoh Leasing Company, Ltd. (TSE:8566) has announced that it will be paying its dividend of ¥80.00 on the 2nd of December, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

View our latest analysis for Ricoh Leasing Company

Ricoh Leasing Company's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Ricoh Leasing Company's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 3.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ricoh Leasing Company Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥45.00 in 2014 to the most recent total annual payment of ¥165.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 3.0% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Ricoh Leasing Company has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Ricoh Leasing Company will make a great income stock. While Ricoh Leasing Company is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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, Ricoh Leasing Company has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Ricoh Leasing Company 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.