Looking For Steady Income For Your Dividend Portfolio? Is Saylor Advertising.Inc. (TYO:2156) A Good Fit?

Could Saylor Advertising.Inc. (TYO:2156) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

A 1.9% yield is nothing to get excited about, but investors probably think the long payment history suggests Saylor Advertising.Inc has some staying power. Before you buy any stock for its dividend however, you should always remember Warren Buffett's two rules: 1) Don't lose money, and 2) Remember rule #1. We'll run through some checks below to help with this.

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Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Although Saylor Advertising.Inc pays a dividend, it was loss-making during the past year. When a company recently reported a loss, we should investigate if its cash flows covered the dividend.

Unfortunately, while Saylor Advertising.Inc pays a dividend, it also reported negative free cash flow last year. While there may be a good reason for this, it's not ideal from a dividend perspective.

We update our data on Saylor Advertising.Inc every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Saylor Advertising.Inc has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. During this period the dividend has been stable, which could imply the business could have relatively consistent earnings power. During the past 10-year period, the first annual payment was JP¥4.0 in 2011, compared to JP¥5.0 last year. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year over that time.

Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential

While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. Saylor Advertising.Inc's EPS have fallen by approximately 31% per year during the past five years. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Saylor Advertising.Inc's earnings per share, which support the dividend, have been anything but stable.

Conclusion

To summarise, shareholders should always check that Saylor Advertising.Inc's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. We're a bit uncomfortable with Saylor Advertising.Inc paying a dividend while loss-making, especially since the dividend was also not well covered by free cash flow. Second, earnings per share have actually shrunk, but at least the dividends have been relatively stable. In this analysis, Saylor Advertising.Inc doesn't shape up too well as a dividend stock. We'd find it hard to look past the flaws, and would not be inclined to think of it as a reliable dividend-payer.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 4 warning signs for Saylor Advertising.Inc (of which 3 make us uncomfortable!) you should know about.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.

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This article by Simply Wall St is general in nature. 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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