Neturen (TSE:5976) Will 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 will take the annual payment to 4.7% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Neturen

Neturen's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

EPS is set to grow by 31.8% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 90% which is a bit high but can definitely be sustainable.

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 ¥16.00, compared to the most recent full-year payment of ¥50.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Neturen Might Find It Hard To Grow Its Dividend

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. We are encouraged to see that Neturen has grown earnings per share at 32% per year over the past five years. EPS has been growing well, but Neturen has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Neturen's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Neturen will make a great income stock. Strong earnings growth means Neturen has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Neturen 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.