JMSLtd (TSE:7702) Is Paying Out A Dividend Of ¥8.50

JMS Co.,Ltd.'s (TSE:7702) investors are due to receive a payment of ¥8.50 per share on 9th of December. This means the annual payment is 3.4% of the current stock price, which is above the average for the industry.

View our latest analysis for JMSLtd

JMSLtd's Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the dividend made up 84% of cash flows, but a higher proportion of net income. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

If the company can't turn things around, EPS could fall by 35.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 494%, which could put the dividend in jeopardy if the company's earnings don't improve.

JMSLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥16.00, compared to the most recent full-year payment of ¥17.00. Its dividends have grown at less than 1% per annum over this time frame. 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

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. JMSLtd's earnings per share has shrunk at 36% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

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 be a touch cautious of relying on this stock primarily for the dividend income.

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. To that end, JMSLtd has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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