Maruwn Corporation's (TSE:9067) dividend will be increasing from last year's payment of the same period to ¥5.00 on 6th of June. This will take the dividend yield to an attractive 3.5%, providing a nice boost to shareholder returns.
See our latest analysis for Maruwn
Maruwn Doesn't Earn Enough To Cover Its Payments
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Maruwn's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
If the company can't turn things around, EPS could fall by 24.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 106%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥7.00 in 2014 to the most recent total annual payment of ¥10.00. This means that it has been growing its distributions at 3.6% 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.
Dividend Growth Potential Is Shaky
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Maruwn's EPS has fallen by approximately 24% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.
Our Thoughts On Maruwn's Dividend
Overall, we always like to see the dividend being raised, but we don't think Maruwn will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Maruwn 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Maruwn you should be aware of, and 1 of them shouldn't be ignored. 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.
About TSE:9067
Flawless balance sheet moderate and pays a dividend.
