Moriroku Holdings Company (TSE:4249) Has Announced That It Will Be Increasing Its Dividend To ¥52.50

Moriroku Holdings Company, Ltd. (TSE:4249) will increase its dividend from last year's comparable payment on the 2nd of December to ¥52.50. This makes the dividend yield 3.8%, which is above the industry average.

Check out our latest analysis for Moriroku Holdings Company

Moriroku Holdings Company's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Moriroku Holdings Company was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 11.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 58%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Moriroku Holdings Company's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ¥90.00 in 2018 to the most recent total annual payment of ¥105.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Moriroku Holdings Company's EPS has declined at around 11% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 example, we've identified 2 warning signs for Moriroku Holdings Company (1 is concerning!) that you should be aware of before investing. 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.

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