Inter Action (TSE:7725) Will Pay A Dividend Of ¥25.00

Inter Action Corporation's (TSE:7725) investors are due to receive a payment of ¥25.00 per share on 26th of August. This means the annual payment is 2.9% of the current stock price, which is above the average for the industry.

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Inter Action'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. However, prior to this announcement, Inter Action's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 0.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 31%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for Inter Action

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥5.00, compared to the most recent full-year payment of ¥35.00. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. Inter Action 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.

Inter Action May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Inter Action has only grown its earnings per share at 3.5% per annum over the past five years. While EPS growth is quite low, Inter Action has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, a consistent dividend is a good thing, and we think that Inter Action has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Inter Action (of which 1 doesn't sit too well with us!) you should know about. Is Inter Action 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.