Maruwn (TSE:9067) Will Pay A Dividend Of ¥5.00

Maruwn Corporation's (TSE:9067) investors are due to receive a payment of ¥5.00 per share on 4th of December. This makes the dividend yield 2.3%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Maruwn's stock price has increased by 57% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Maruwn

Maruwn's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 70% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

If the company can't turn things around, EPS could fall by 20.2% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 88%, meaning that most of the company's earnings is being paid out to shareholders.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥7.00 total annually to ¥10.00. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Maruwn's EPS has declined at around 20% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Maruwn's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Maruwn is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 4 warning signs for Maruwn (2 shouldn't be ignored!) that you should be aware of before investing. Is Maruwn 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.

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