Neturen (TSE:5976) Has Announced A Dividend Of ¥24.00

Neturen Co., Ltd. (TSE:5976) has announced that it will pay a dividend of ¥24.00 per share on the 1st of July. This will take the dividend yield to an attractive 4.5%, providing a nice boost to shareholder returns.

View our latest analysis for Neturen

Neturen Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 848% of what it was earning and 87% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

EPS is set to fall by 40.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 1,840%, which could put the dividend under pressure if earnings don't start to improve.

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 annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥48.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Neturen 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.

Dividend Growth Potential Is Shaky

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. Over the past five years, it looks as though Neturen's EPS has declined at around 41% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

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 are bit high to be considered sustainable, and the track record isn't the best. We don't think Neturen is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 4 warning signs for Neturen that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.