Cube System (TSE:2335) Has Affirmed Its Dividend Of ¥20.00

Cube System Inc.'s (TSE:2335) investors are due to receive a payment of ¥20.00 per share on 3rd of December. This makes the dividend yield 3.5%, which will augment investor returns quite nicely.

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Cube System's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Cube System's dividend was only 46% of earnings, however it was paying out 293% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 12.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 46% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Cube System

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥11.00, compared to the most recent full-year payment of ¥42.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% 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 see if earnings per share is growing. Cube System has seen EPS rising for the last five years, at 13% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Cube System's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Cube System's payments, as there could be some issues with sustaining them into the future. While Cube System 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Cube System that investors should know about before committing capital to this stock. Is Cube System 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.