Unite and Grow's (TSE:4486) Upcoming Dividend Will Be Larger Than Last Year's

The board of Unite and Grow Inc. (TSE:4486) has announced that the dividend on 31st of March will be increased to ¥24.00, which will be 9.1% higher than last year's payment of ¥22.00 which covered the same period. This will take the dividend yield to an attractive 2.1%, providing a nice boost to shareholder returns.

See our latest analysis for Unite and Grow

Unite and Grow's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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 annual payment during the last 5 years was ¥5.00 in 2019, and the most recent fiscal year payment was ¥22.00. This works out to be a compound annual growth rate (CAGR) of approximately 34% a year over that time. Unite and Grow has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

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. We are encouraged to see that Unite and Grow has grown earnings per share 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.

Unite and Grow 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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Unite and Grow 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.