ORIX (TSE:8591) Has Announced A Dividend Of ¥49.30

The board of ORIX Corporation (TSE:8591) has announced that it will pay a dividend on the 9th of December, with investors receiving ¥49.30 per share. This makes the dividend yield about the same as the industry average at 3.1%.

See our latest analysis for ORIX

ORIX's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, ORIX's dividend was only 27% of earnings, however it was paying out 267% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 8.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 ¥23.00, compared to the most recent full-year payment of ¥98.60. This means that it has been growing its distributions at 16% per annum over that time. ORIX has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See ORIX's Dividend Growing

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. ORIX has impressed us by growing EPS at 5.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for ORIX's prospects of growing its dividend payments in the future.

Our Thoughts On ORIX's Dividend

Overall, we always like to see the dividend being raised, but we don't think ORIX will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, ORIX has 4 warning signs (and 1 which is significant) we think 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.