Base (TSE:4481) Has Announced That It Will Be Increasing Its Dividend To ¥57.00

Base Co., Ltd. (TSE:4481) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of September to ¥57.00. This will take the dividend yield to an attractive 3.6%, providing a nice boost to shareholder returns.

Our free stock report includes 1 warning sign investors should be aware of before investing in Base. Read for free now.

Base's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Base's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 9.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 58% by next year, which is in a pretty sustainable range.

View our latest analysis for Base

Base's Dividend Has Lacked Consistency

Base has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 5 years was ¥23.33 in 2020, and the most recent fiscal year payment was ¥117.00. This works out to be a compound annual growth rate (CAGR) of approximately 38% a year over that time. Base 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 Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Base has grown earnings per share at 25% per year over the past five years. Base is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Base Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Base that investors need to be conscious of moving forward. Is Base 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.