R&D ComputerLtd's (TSE:3924) Upcoming Dividend Will Be Larger Than Last Year's

The board of R&D Computer Co.,Ltd. (TSE:3924) has announced that it will be paying its dividend of ¥19.00 on the 1st of December, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 5.0%, providing a nice boost to shareholder returns.

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R&D ComputerLtd'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. Prior to this announcement, R&D ComputerLtd's dividend was only 56% of earnings, however it was paying out 95% 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 10.3% 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 59% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for R&D ComputerLtd

R&D ComputerLtd Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥38.00. This implies that the company grew its distributions at a yearly rate of about 40% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. R&D ComputerLtd has seen EPS rising for the last five years, at 10% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On R&D ComputerLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While R&D ComputerLtd is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. Just as an example, we've come across 3 warning signs for R&D ComputerLtd you should be aware of, and 1 of them is concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.