ORIX (TSE:8591) Will Pay 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. The payment will take the dividend yield to 2.9%, which is in line with the average for the industry.

View our latest analysis for ORIX

ORIX's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, ORIX was paying a whopping 267% as a dividend, but this only made up 27% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 8.2%. 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

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥23.00 in 2014, and the most recent fiscal year payment was ¥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.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. ORIX has seen EPS rising for the last five years, at 5.6% per annum. 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. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for ORIX you should be aware of, and 1 of them doesn't sit too well with us. 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.