Gendai Agency Inc. (TSE:2411) has announced that it will pay a dividend of ¥10.00 per share on the 2nd of June. This takes the dividend yield to 5.7%, which shareholders will be pleased with.
See our latest analysis for Gendai Agency
Gendai Agency's Future Dividends May Potentially Be At Risk
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Looking forward, EPS could fall by 10.7% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 341%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥28.00 in 2014, and the most recent fiscal year payment was ¥20.00. The dividend has shrunk at around 3.3% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
Gendai Agency's Dividend Doesn't Look Great
Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Gendai Agency you should be aware of, and 1 of them is significant. Is Gendai Agency 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.
About TSE:2411
Gendai Agency
Engages in planning and production of advertising and promotion services in Japan.
Excellent balance sheet low.
