M3, Inc. (TSE:2413) has announced that it will be increasing its periodic dividend on the 12th of June to ¥21.00, which will be 11% higher than last year's comparable payment amount of ¥19.00. Based on this payment, the dividend yield for the company will be 0.9%, which is fairly typical for the industry.
View our latest analysis for M3
M3's Dividend Is Well Covered By Earnings
We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, M3'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 rise by 45.3% over the next year. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.
M3 Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥2.50 in 2014 to the most recent total annual payment of ¥19.00. This means that it has been growing its distributions at 22% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
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. M3 has seen EPS rising for the last five years, at 18% per annum. M3 definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
M3 Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for M3 that investors should take into consideration. 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.
About TSE:2413
M3
Provides medical-related services primarily to physicians and other healthcare professionals through Internet.
Undervalued with excellent balance sheet and pays a dividend.
