Ricoh Company's (TSE:7752) Shareholders Will Receive A Bigger Dividend Than Last Year

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 ¥20.00. This makes the dividend yield about the same as the industry average at 2.9%.

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Ricoh Company's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Ricoh Company was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 88% indicates it is more focused on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 12.6%. 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.

View our latest analysis for Ricoh Company

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥34.00 in 2015, and the most recent fiscal year payment was ¥40.00. This implies that the company grew its distributions at a yearly rate of about 1.6% over that duration. 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 Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Ricoh Company has been growing its earnings per share at 63% a year over the past five years. Ricoh Company is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Ricoh Company's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Ricoh Company's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 2 warning signs 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.

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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.