Iriso Electronics (TSE:6908) Has Announced That It Will Be Increasing Its Dividend To ¥90.00

Iriso Electronics Co., Ltd. (TSE:6908) will increase its dividend from last year's comparable payment on the 28th of June to ¥90.00. This takes the dividend yield to 3.0%, which shareholders will be pleased with.

Check out our latest analysis for Iriso Electronics

Iriso Electronics' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Iriso Electronics was paying only paying out a fraction of earnings, but the payment was a massive 140% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 7.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 2014, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 2.4% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, Iriso Electronics has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Iriso Electronics is earning enough to cover the payments, the cash flows are lacking. We don't think Iriso Electronics is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Iriso Electronics that investors need to be conscious of moving forward. Is Iriso Electronics 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.