Dear LifeLtd (TSE:3245) Is Increasing Its Dividend To ¥62.00

Dear Life Co.,Ltd.'s (TSE:3245) dividend will be increasing from last year's payment of the same period to ¥62.00 on 1st of January. This takes the dividend yield to 5.5%, which shareholders will be pleased with.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dear LifeLtd's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Dear LifeLtd's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 10.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Dear LifeLtd

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 annual payment during the last 10 years was ¥4.38 in 2015, and the most recent fiscal year payment was ¥62.00. This implies that the company grew its distributions at a yearly rate of about 30% 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Dear LifeLtd has been growing its earnings per share at 10% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

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. To that end, Dear LifeLtd has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Dear LifeLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.