Dear LifeLtd (TSE:3245) Has Announced That It Will Be Increasing Its Dividend To ¥46.00

Dear Life Co.,Ltd. (TSE:3245) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of December to ¥46.00. This will take the dividend yield to an attractive 4.3%, providing a nice boost to shareholder returns.

See our latest analysis for Dear LifeLtd

Dear LifeLtd's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Dear LifeLtd was paying only paying out a fraction of earnings, but the payment was a massive 154% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 8.1% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥1.79 in 2014 to the most recent total annual payment of ¥46.00. This implies that the company grew its distributions at a yearly rate of about 38% over that duration. Dear LifeLtd 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.

We Could See Dear LifeLtd's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Dear LifeLtd has impressed us by growing EPS at 8.1% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Dear LifeLtd's prospects of growing its dividend payments in the future.

Our Thoughts On Dear LifeLtd's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Dear LifeLtd's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Dear LifeLtd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.