Dentsu Group (TSE:4324) Has Announced A Dividend Of ¥69.75

Dentsu Group Inc. (TSE:4324) has announced that it will pay a dividend of ¥69.75 per share on the 14th of March. This will take the dividend yield to an attractive 2.8%, providing a nice boost to shareholder returns.

Check out our latest analysis for Dentsu Group

Dentsu Group's Distributions May Be Difficult To Sustain

If the payments aren't sustainable, a high yield for a few years won't matter that much. Even though Dentsu Group is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Looking forward, earnings per share is forecast to rise by 31.4% over the next year. This is the right direction to be moving, but it is not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥32.00 in 2014 to the most recent total annual payment of ¥130.75. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Dentsu Group has been growing its earnings per share at 22% a year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

Dentsu Group's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Dentsu Group will make a great income stock. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We don't think Dentsu Group is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Dentsu Group that investors should take into consideration. Is Dentsu Group 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.