ZOZO (TSE:3092) Will Pay A Dividend Of ¥53.00

ZOZO, Inc. (TSE:3092) will pay a dividend of ¥53.00 on the 27th of November. This takes the dividend yield to 2.4%, which shareholders will be pleased with.

View our latest analysis for ZOZO

ZOZO's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, ZOZO's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 96% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Earnings per share is forecast to rise by 5.7% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 83% which is a bit high but can definitely be sustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥6.67 total annually to ¥107.00. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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 ZOZO has been growing its earnings per share at 23% a year over the past five years. However, ZOZO isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ZOZO will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think ZOZO is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 2 warning signs for ZOZO (1 is significant!) that you should be aware of before investing. 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.

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