MERF (TSE:3168) Has Announced A Dividend Of ¥10.00

The board of MERF Inc. (TSE:3168) has announced that it will pay a dividend on the 8th of May, with investors receiving ¥10.00 per share. Based on this payment, the dividend yield will be 3.7%, which is fairly typical for the industry.

View our latest analysis for MERF

MERF's Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, MERF's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 7.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

MERF Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of ¥5.00 in 2016 to the most recent total annual payment of ¥20.00. This means that it has been growing its distributions at 17% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. MERF has impressed us by growing EPS at 7.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for MERF's prospects of growing its dividend payments in the future.

Our Thoughts On MERF's Dividend

Overall, we think MERF is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for MERF (of which 1 is concerning!) 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.

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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.