AZ-COM MARUWA Holdings (TSE:9090) Is Increasing Its Dividend To ¥16.00

AZ-COM MARUWA Holdings Inc. (TSE:9090) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥16.00. The payment will take the dividend yield to 2.8%, which is in line with the average for the industry.

Check out our latest analysis for AZ-COM MARUWA Holdings

AZ-COM MARUWA Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. AZ-COM MARUWA Holdings was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 13.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥2.73 in 2014, and the most recent fiscal year payment was ¥32.00. This means that it has been growing its distributions at 28% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. AZ-COM MARUWA Holdings has impressed us by growing EPS at 14% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On AZ-COM MARUWA Holdings' Dividend

Overall, we always like to see the dividend being raised, but we don't think AZ-COM MARUWA Holdings will make a great income stock. While AZ-COM MARUWA Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for AZ-COM MARUWA Holdings that investors should take into consideration. Is AZ-COM MARUWA Holdings 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.