UNITED (TSE:2497) Is Due To Pay A Dividend Of ¥24.00

The board of UNITED, Inc. (TSE:2497) has announced that it will pay a dividend of ¥24.00 per share on the 20th of June. The dividend yield will be 6.0% based on this payment which is still above the industry average.

See our latest analysis for UNITED

UNITED's Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, UNITED was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

EPS is set to grow by 39.6% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 174%, which probably can't continue without starting to put some pressure on the balance sheet.

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 ¥0.50 in 2014, and the most recent fiscal year payment was ¥48.00. This means that it has been growing its distributions at 58% per annum 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that UNITED has been growing its earnings per share at 40% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about UNITED's payments, as there could be some issues with sustaining them into the future. While UNITED 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. 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 UNITED (of which 1 is a bit concerning!) you should know about. Is UNITED 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.