ITmedia (TSE:2148) Will Pay A Dividend Of ¥100.00

ITmedia Inc. (TSE:2148) has announced that it will pay a dividend of ¥100.00 per share on the 8th of June. This means the annual payment is 6.2% of the current stock price, which is above the average for the industry.

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ITmedia's Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 140% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

The next 12 months is set to see EPS grow by 12.1%. If the dividend continues on its recent course, the payout ratio in 12 months could be 162%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for ITmedia

ITmedia Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥3.33, compared to the most recent full-year payment of ¥100.00. This implies that the company grew its distributions at a yearly rate of about 41% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that ITmedia has grown earnings per share at 6.9% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

ITmedia's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for ITmedia that investors need to be conscious of moving forward. 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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