Ricoh Company's (TSE:7752) Dividend Will Be Increased To ¥19.00

Ricoh Company, Ltd. (TSE:7752) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥19.00. This makes the dividend yield about the same as the industry average at 2.8%.

See our latest analysis for Ricoh Company

Ricoh Company's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Ricoh Company was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 16.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, 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. The annual payment during the last 10 years was ¥33.00 in 2014, and the most recent fiscal year payment was ¥38.00. This means that it has been growing its distributions at 1.4% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend's Growth Prospects Are Limited

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. Although it's important to note that Ricoh Company's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. The company has been growing at a pretty soft 1.7% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. As an example, we've identified 1 warning sign for Ricoh Company that you should be aware of before investing. 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.

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