Riken Vitamin (TSE:4526) Will Pay A Dividend Of ¥40.50

Riken Vitamin Co., Ltd. (TSE:4526) will pay a dividend of ¥40.50 on the 5th of December. This will take the annual payment to 2.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Riken Vitamin

Riken Vitamin's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Riken Vitamin's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 2.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 35%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Riken Vitamin Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥81.00. This means that it has been growing its distributions at 15% 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Riken Vitamin has been growing its earnings per share at 29% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Riken Vitamin's Dividend

Overall, a dividend increase is always good, and we think that Riken Vitamin is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Riken Vitamin that investors need to be conscious of moving forward. 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.

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