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

The board of JMS Co.,Ltd. (TSE:7702) has announced that it will pay a dividend on the 9th of December, with investors receiving ¥8.50 per share. This means the annual payment is 3.3% of the current stock price, which is above the average for the industry.

View our latest analysis for JMSLtd

JMSLtd Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the dividend made up 84% of cash flows, but a higher proportion of net income. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

EPS is set to fall by 35.6% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 494%, which could put the dividend under pressure if earnings don't start to improve.

JMSLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥16.00 total annually to ¥17.00. Dividend payments have grown at less than 1% a year over this period. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Earnings per share has been sinking by 36% over the last 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, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for JMSLtd (of which 1 doesn't sit too well with us!) you should know about. Is JMSLtd 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.