Mani, Inc.'s (TSE:7730) periodic dividend will be increasing on the 6th of November to ¥23.00, with investors receiving 9.5% more than last year's ¥21.00. This will take the annual payment to 2.0% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Mani
Mani's Earnings Easily Cover The Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Mani's dividend was only 31% of earnings, however it was paying out 178% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
The next year is set to see EPS grow by 21.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥6.89 total annually to ¥37.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Mani has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend's Growth Prospects Are Limited
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Mani's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Mani has the option to increase the payout ratio to return more cash to shareholders.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Mani is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Mani 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:7730
Mani
Engages in the manufacture and distribution of medical devices and dental instruments in Japan and internationally.
Flawless balance sheet and fair value.
