Dentsu Group's (TSE:4324) Dividend Will Be ¥69.75

Dentsu Group Inc. (TSE:4324) has announced that it will pay a dividend of ¥69.75 per share on the 12th of September. This means the annual payment is 3.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Dentsu Group

Dentsu Group'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. Dentsu Group 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 31.7% 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. 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 ¥139.50. This implies that the company grew its distributions at a yearly rate of about 16% 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 Company Could Face Some Challenges Growing The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Dentsu Group has impressed us by growing EPS at 17% per year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. Strong earnings growth means Dentsu Group has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Dentsu Group is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 9 analysts we track are forecasting for Dentsu Group for free with public analyst estimates for the company. 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.

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