Riken Vitamin's (TSE:4526) Shareholders Will Receive A Bigger Dividend Than Last Year

Riken Vitamin Co., Ltd. (TSE:4526) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of December to ¥55.00. This will take the annual payment to 4.0% of the stock price, which is above what most companies in the industry pay.

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Riken Vitamin's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Riken Vitamin was paying a whopping 106% as a dividend, but this only made up 30% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS could expand by 25.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Riken Vitamin

Riken Vitamin Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥27.50 in 2015, and the most recent fiscal year payment was ¥110.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Riken Vitamin has impressed us by growing EPS at 26% per 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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Riken Vitamin will make a great income stock. While Riken Vitamin is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Riken Vitamin that you should be aware of before investing. Is Riken Vitamin 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.