Ceres' (TSE:3696) Shareholders Will Receive A Bigger Dividend Than Last Year

Ceres Inc.'s (TSE:3696) periodic dividend will be increasing on the 26th of March to ¥80.00, with investors receiving 33% more than last year's ¥60.00. This takes the annual payment to 2.4% of the current stock price, which is about average for the industry.

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Ceres' Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Ceres' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 137.4% if recent trends continue. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Ceres

Ceres' Dividend Has Lacked Consistency

Ceres has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥60.00. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Ceres has grown earnings per share at 137% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Ceres' Dividend

Overall, a dividend increase is always good, and we think that Ceres is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 4 warning signs for Ceres (1 doesn't sit too well with us!) that you should be aware of before investing. Is Ceres 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.