Moriroku Holdings Company's (TSE:4249) Dividend Will Be ¥52.50

Moriroku Holdings Company, Ltd. (TSE:4249) will pay a dividend of ¥52.50 on the 4th of June. This makes the dividend yield 5.3%, which is above the industry average.

View our latest analysis for Moriroku Holdings Company

Estimates Indicate Moriroku Holdings Company's Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Moriroku Holdings Company's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, EPS could fall by 31.4% 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 reach 617%, which could put the dividend in jeopardy if the company's earnings don't improve.

Moriroku Holdings Company's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2018, the dividend has gone from ¥90.00 total annually to ¥105.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.2% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Limited Growth Potential

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. Moriroku Holdings Company's earnings per share has shrunk at 31% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 3 warning signs for Moriroku Holdings Company that investors should know about before committing capital to this stock. Is Moriroku Holdings Company 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.