JMSLtd (TSE:7702) Is Due To Pay A Dividend Of ¥8.50

JMS Co.,Ltd. (TSE:7702) has announced that it will pay a dividend of ¥8.50 per share on the 10th of December. This makes the dividend yield 3.7%, which will augment investor returns quite nicely.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

JMSLtd Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. Despite not generating a profit, JMSLtd is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Over the next year, EPS might fall by 69.3% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

See our latest analysis for JMSLtd

JMSLtd Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥16.00 in 2015 to the most recent total annual payment of ¥17.00. Dividend payments have been growing, but very slowly over the period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. JMSLtd's earnings per share has shrunk at 69% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

JMSLtd's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for JMSLtd (of which 3 are a bit unpleasant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.