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

The board of Dear Life Co.,Ltd. (TSE:3245) has announced that it will be paying its dividend of ¥62.00 on the 1st of January, an increased payment from last year's comparable dividend. This will take the annual payment to 4.9% of the stock price, which is above what most companies in the industry pay.

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

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Dear LifeLtd's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

If the trend of the last few years continues, EPS will grow by 10.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.

See 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 works out to be a compound annual growth rate (CAGR) of approximately 30% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Dear LifeLtd has seen EPS rising for the last five years, at 10% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

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 don't think Dear LifeLtd 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. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Dear LifeLtd (of which 2 are a bit unpleasant!) you should know about. 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.