Macromill (TSE:3978) Is Paying Out A Larger Dividend Than Last Year

Macromill, Inc. (TSE:3978) will increase its dividend from last year's comparable payment on the 30th of September to ¥15.00. This will take the annual payment to 3.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Macromill

Macromill's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Macromill was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 32.7%. If the dividend continues on this path, the payout ratio could be 54% by next year, which we think can be pretty sustainable going forward.

Macromill Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of ¥5.00 in 2017 to the most recent total annual payment of ¥24.00. This means that it has been growing its distributions at 25% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Macromill's EPS has declined at around 20% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Macromill's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short 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. 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 2 warning signs for Macromill you should be aware of, and 1 of them makes us a bit uncomfortable. Is Macromill not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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