Unite and Grow (TSE:4486) Is Increasing Its Dividend To ¥24.00

Unite and Grow Inc. (TSE:4486) has announced that it will be increasing its periodic dividend on the 31st of March to ¥24.00, which will be 9.1% higher than last year's comparable payment amount of ¥22.00. Based on this payment, the dividend yield for the company will be 1.6%, which is fairly typical for the industry.

View our latest analysis for Unite and Grow

Unite and Grow's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Unite and Grow's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 13.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

Unite and Grow Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of ¥5.00 in 2019 to the most recent total annual payment of ¥22.00. This works out to be a compound annual growth rate (CAGR) of approximately 34% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Unite and Grow has impressed us by growing EPS at 13% per year over the past five years. Unite and Grow definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Unite and Grow's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Unite and Grow that investors need to be conscious of moving forward. 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.