Belluna (TSE:9997) Will Pay A Dividend Of ¥14.50

Belluna Co., Ltd. (TSE:9997) will pay a dividend of ¥14.50 on the 27th of June. This will take the dividend yield to an attractive 3.1%, providing a nice boost to shareholder returns.

Check out our latest analysis for Belluna

Belluna's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, based ont he last payment, Belluna was earning enough to cover the dividend pretty comfortably. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Unless the company can turn things around, EPS could fall by 4.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 51%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Belluna Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥12.50 in 2015, and the most recent fiscal year payment was ¥29.00. This implies that the company grew its distributions at a yearly rate of about 8.8% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Belluna May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. It's not great to see that Belluna's earnings per share has fallen at approximately 4.5% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Belluna will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Belluna has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 3 warning signs for Belluna you should be aware of, and 2 of them shouldn't be ignored. 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.