eBASELtd's (TSE:3835) Shareholders Will Receive A Bigger Dividend Than Last Year

eBASE Co.,Ltd. (TSE:3835) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of June to ¥7.20. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

See our latest analysis for eBASELtd

eBASELtd's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, eBASELtd's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 8.7% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥1.23 in 2014 to the most recent total annual payment of ¥7.20. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. eBASELtd 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.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that eBASELtd has been growing its earnings per share at 8.7% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for eBASELtd's prospects of growing its dividend payments in the future.

We Really Like eBASELtd's Dividend

Overall, a dividend increase is always good, and we think that eBASELtd is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Are management backing themselves to deliver performance? Check their shareholdings in eBASELtd in our latest insider ownership analysis. If you are a dividend investor, you might also want to look at our curated list of high yield 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.