Intelligent Wave's (TSE:4847) Upcoming Dividend Will Be Larger Than Last Year's

Intelligent Wave Inc.'s (TSE:4847) dividend will be increasing from last year's payment of the same period to ¥25.00 on 30th of September. This will take the annual payment to 2.4% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Intelligent Wave

Intelligent Wave's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Earnings per share could rise by 21.5% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 83%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Intelligent Wave Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥5.00 in 2014 to the most recent total annual payment of ¥30.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Intelligent Wave's Dividend Might Lack Growth

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 Intelligent Wave has grown earnings per share at 21% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Intelligent Wave hasn't been doing.

Our Thoughts On Intelligent Wave's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

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. To that end, Intelligent Wave has 2 warning signs (and 1 which is concerning) we think you should know about. Is Intelligent Wave 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.