Riso Kagaku (TSE:6413) Will Pay A Dividend Of ¥50.00

Riso Kagaku Corporation's (TSE:6413) investors are due to receive a payment of ¥50.00 per share on 26th of June. This makes the dividend yield 4.3%, which will augment investor returns quite nicely.

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Riso Kagaku's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Riso Kagaku was paying out quite a large proportion of both earnings and cash flow, with the dividend being 528% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

EPS is set to grow 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.

Check out our latest analysis for Riso Kagaku

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥30.00 in 2015, and the most recent fiscal year payment was ¥50.00. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Riso Kagaku might have put its house in order since then, but we remain cautious.

Riso Kagaku's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Riso Kagaku has seen EPS rising for the last five years, at 122% per annum. 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 Riso Kagaku is not retaining those earnings to reinvest in growth.

Riso Kagaku's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Riso Kagaku has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. Overall, we don't think this company has the makings of a good 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. For instance, we've picked out 1 warning sign for Riso Kagaku that investors should take into consideration. 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.