Monex Group (TSE:8698) Has Announced That It Will Be Increasing Its Dividend To ¥32.00

Monex Group, Inc.'s (TSE:8698) dividend will be increasing from last year's payment of the same period to ¥32.00 on 5th of June. Although the dividend is now higher, the yield is only 1.8%, which is below the industry average.

View our latest analysis for Monex Group

Monex Group Is Paying Out More Than It Is Earning

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Monex 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. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS is forecast to fall by 1.3%. Assuming the dividend continues along recent trends, we believe the payout ratio could reach over 200%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥6.00 in 2014, and the most recent fiscal year payment was ¥16.00. This means that it has been growing its distributions at 10% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Monex 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, Monex Group has only grown its earnings per share at 2.8% per annum over the past five years. Slow growth and a high payout ratio could mean that Monex Group has maxed out the amount that it has been able to pay to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

Monex Group's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Monex Group has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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