Riso Kagaku (TSE:6413) Has Announced A Dividend Of ¥50.00

Riso Kagaku Corporation (TSE:6413) will pay a dividend of ¥50.00 on the 26th of June. Based on this payment, the dividend yield on the company's stock will be 4.0%, which is an attractive boost to shareholder returns.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Riso Kagaku's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Riso Kagaku was paying out quite a large proportion of both earnings and cash flow, with the dividend being 100% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Earnings per share is forecast to rise by 5.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 80%, which is on the higher side, but certainly still feasible.

View our latest analysis for Riso Kagaku

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ¥30.00 total annually to ¥50.00. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Riso Kagaku's Dividend Might Lack Growth

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Riso Kagaku has seen EPS rising for the last five years, at 122% per annum. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

Riso Kagaku's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Riso Kagaku's payments, as there could be some issues with sustaining them into the future. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. This company is not in the top tier of income providing stocks.

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. For example, we've picked out 1 warning sign for Riso Kagaku that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.