AZ-COM MARUWA Holdings' (TSE:9090) Shareholders Will Receive A Bigger Dividend Than Last Year

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. This makes the dividend yield about the same as the industry average at 2.5%.

View our latest analysis for AZ-COM MARUWA Holdings

AZ-COM MARUWA Holdings' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. But before making this announcement, AZ-COM MARUWA Holdings' earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Over the next year, EPS is forecast to expand by 11.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ¥2.73 in 2014 to the most recent total annual payment of ¥32.00. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

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. It's encouraging to see that AZ-COM MARUWA Holdings has been growing its earnings per share at 17% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

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 don't think AZ-COM MARUWA Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for AZ-COM MARUWA Holdings that investors should take into consideration. 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.

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