Mani, Inc. (TSE:7730) has announced that it will be increasing its periodic dividend on the 6th of November to ¥23.00, which will be 9.5% higher than last year's comparable payment amount of ¥21.00. This will take the dividend yield to an attractive 2.0%, providing a nice boost to shareholder returns.
View our latest analysis for Mani
Mani's Payment Has Solid Earnings Coverage
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.
Looking forward, earnings per share is forecast to rise by 18.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 57% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥6.89 in 2014 to the most recent total annual payment of ¥37.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Mani May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend 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 growth may be thin on the ground, Mani could always pay out a higher proportion of earnings to increase shareholder returns.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Mani will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Mani that investors should know about before committing capital to this stock. 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.
