The board of Gendai Agency Inc. (TSE:2411) has announced that it will pay a dividend on the 10th of June, with investors receiving ¥9.00 per share. This will take the annual payment to 4.9% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Gendai Agency
Gendai Agency's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend made up a very large portion of earnings and also represented 77% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.
Looking forward, could fall by 8.1% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 93%, which is definitely on the higher side.
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 annual payment back then was ¥28.00, compared to the most recent full-year payment of ¥18.00. This works out to be a decline of approximately 4.3% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth Is Doubtful
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Gendai Agency's earnings per share has shrunk at approximately 8.1% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.
The Dividend Could Prove To Be Unreliable
Overall, we always like to see the dividend being raised, but we don't think Gendai Agency will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of 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. For instance, we've picked out 3 warning signs for Gendai Agency that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
