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

The board of Intelligent Wave Inc. (TSE:4847) has announced that it will be paying its dividend of ¥25.00 on the 30th of September, an increased payment from last year's comparable dividend. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Intelligent Wave

Intelligent Wave's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Intelligent Wave was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. We think that this practice can make the dividend quite risky in the future.

EPS is set to grow by 21.5% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 83%, which is on the higher side, but certainly still feasible.

Intelligent Wave Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥5.00, compared to the most recent full-year payment of ¥30.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. 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.

Dividend Growth Could Be Constrained

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Intelligent Wave has been growing its earnings per share at 21% a year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Intelligent Wave is not retaining those earnings to reinvest in growth.

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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 2 warning signs for Intelligent Wave (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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