Scroll (TSE:8005) Will Pay A Dividend Of ¥29.50

Scroll Corporation's (TSE:8005) investors are due to receive a payment of ¥29.50 per share on 2nd of June. This will take the annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Scroll's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Scroll's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, could fall by 1.3% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 82% in the next 12 months which is on the higher end of the range we would say is sustainable.

See our latest analysis for Scroll

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 ¥10.00 in 2015, and the most recent fiscal year payment was ¥59.00. This means that it has been growing its distributions at 19% per annum over that time. Scroll 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Scroll's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Scroll's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Scroll you should be aware of, and 1 of them is significant. Is Scroll 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.