Ricoh Leasing Company's (TSE:8566) Shareholders Will Receive A Bigger Dividend Than Last Year

Ricoh Leasing Company, Ltd. (TSE:8566) will increase its dividend from last year's comparable payment on the 2nd of December to ¥80.00. This makes the dividend yield about the same as the industry average at 3.2%.

See our latest analysis for Ricoh Leasing Company

Ricoh Leasing Company's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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 been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥45.00 in 2014, and the most recent fiscal year payment was ¥165.00. This means that it has been growing its distributions at 14% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 3.0% per year. While EPS growth is quite low, Ricoh Leasing Company has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Ricoh Leasing Company's Dividend

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 don't think Ricoh Leasing Company is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Ricoh Leasing Company (of which 1 is concerning!) 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.