Neturen (TSE:5976) Is Due To Pay A Dividend Of ¥25.00

Neturen Co., Ltd.'s (TSE:5976) investors are due to receive a payment of ¥25.00 per share on 6th of December. This makes the dividend yield 5.0%, which is above the industry average.

See our latest analysis for Neturen

Neturen's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to grow by 32.0% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 89%, which is on the higher side, but certainly still feasible.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥16.00 total annually to ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Neturen has impressed us by growing EPS at 32% per year over the past five years. Although earnings per share is up nicely Neturen is paying out 109% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Neturen's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Neturen's payments are rock solid. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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. 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 Neturen that investors should know about before committing capital to this stock. Is Neturen 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.