Marvelous (TSE:7844) Has Announced That Its Dividend Will Be Reduced To ¥10.00

The board of Marvelous Inc. (TSE:7844) has announced that the dividend on 9th of June will be reduced by 70% from last year's ¥33.00 to ¥10.00. The yield is still above the industry average at 6.6%.

View our latest analysis for Marvelous

Marvelous Might Find It Hard To Continue The Dividend

A big dividend yield for a few years doesn't mean much if it can't be sustained. Despite not generating a profit, Marvelous 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 65.7% 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. Unless this can be done in short order, the dividend might be difficult to sustain.

Marvelous Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥15.00 in 2015, and the most recent fiscal year payment was ¥33.00. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Over the past five years, it looks as though Marvelous' EPS has declined at around 32% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. 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.

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. Dividend payments have been pretty consistent for a while, but we do think the payout ratios are a little bit high. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Marvelous that investors should take into consideration. 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.