Amuse (TSE:4301) Has Announced A Dividend Of ¥20.00

Amuse Inc. (TSE:4301) has announced that it will pay a dividend of ¥20.00 per share on the 5th of December. Based on this payment, the dividend yield on the company's stock will be 2.5%, which is an attractive boost to shareholder returns.

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Amuse's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Looking forward, EPS could fall by 10.1% 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 be 48%, which we consider to be quite comfortable, even though the current levels are slightly more elevated.

View our latest analysis for Amuse

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥40.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Amuse has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 Amuse's EPS has declined at around 10% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of Amuse's Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 3 warning signs for Amuse that you should be aware of before investing. 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.