Base (TSE:4481) Is Increasing Its Dividend To ¥60.00

The board of Base Co., Ltd. (TSE:4481) has announced that it will be paying its dividend of ¥60.00 on the 10th of March, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

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Base's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Base's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 10.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 59% by next year, which is in a pretty sustainable range.

Check out 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. Since 2019, the annual payment back then was ¥23.33, compared to the most recent full-year payment of ¥120.00. This works out to be a compound annual growth rate (CAGR) of approximately 31% 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Base has been growing its earnings per share at 18% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Base Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Base that you should be aware of before investing. 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.