COLOPL (TSE:3668) Will Pay A Dividend Of ¥20.00

COLOPL, Inc. (TSE:3668) has announced that it will pay a dividend of ¥20.00 per share on the 24th of December. This makes the dividend yield 3.9%, which will augment investor returns quite nicely.

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COLOPL's Distributions May Be Difficult To Sustain

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. COLOPL isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This makes us feel that the dividend will be hard to maintain.

Looking forward, earnings per share is forecast to rise by 96.5% over the next year. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

See our latest analysis for COLOPL

COLOPL's Dividend Has Lacked Consistency

It's comforting to see that COLOPL has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was ¥16.00 in 2016, and the most recent fiscal year payment was ¥20.00. This means that it has been growing its distributions at 2.5% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Potential Is Shaky

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. Over the past five years, it looks as though COLOPL's EPS has declined at around 58% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

COLOPL's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help COLOPL make more consistent payments in the future. 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. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for COLOPL 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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