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 takes the dividend yield to 4.6%, which shareholders will be pleased with.

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Dear LifeLtd's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Dear LifeLtd's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS could expand by 11.7% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 54% by next year, which is in a pretty sustainable range.

See our latest analysis for Dear LifeLtd

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 ¥4.38 in 2015 to the most recent total annual payment of ¥62.00. This implies that the company grew its distributions at a yearly rate of about 30% 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 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. Dear LifeLtd has impressed us by growing EPS at 12% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Dear LifeLtd is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Dear LifeLtd has 2 warning signs (and 1 which doesn't sit too well with us) 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.

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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.