R&D ComputerLtd's (TSE:3924) Dividend Will Be Increased To ¥19.00

R&D Computer Co.,Ltd. (TSE:3924) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of December to ¥19.00. This will take the dividend yield to an attractive 4.0%, providing a nice boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that R&D ComputerLtd's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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R&D ComputerLtd'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. Based on the last dividend, R&D ComputerLtd is earning enough to cover the payment, but then it makes up 95% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to grow by 11.1% over the next year if recent trends continue. If recent patterns in the dividend continue, the payout ratio in 12 months could be 76% which is a bit high but can definitely be sustainable.

View our latest analysis for R&D ComputerLtd

R&D ComputerLtd Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of ¥10.00 in 2021 to the most recent total annual payment of ¥38.00. This implies that the company grew its distributions at a yearly rate of about 40% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. R&D ComputerLtd has impressed us by growing EPS at 11% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, we always like to see the dividend being raised, but we don't think R&D ComputerLtd will make a great income stock. While R&D ComputerLtd is earning enough to cover the payments, the cash flows are lacking. We don't think R&D ComputerLtd is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for R&D ComputerLtd that investors should take into consideration. Is R&D ComputerLtd 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.