Unipres' (TSE:5949) Dividend Will Be ¥30.00

Unipres Corporation (TSE:5949) has announced that it will pay a dividend of ¥30.00 per share on the 29th of June. This means the annual payment is 4.8% of the current stock price, which is above the average for the industry.

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Unipres' Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Unipres' Could Struggle to Maintain Dividend Payments In The Future

Unipres' Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Unipres is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Earnings per share is forecast to rise by 109.0% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 156%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Unipres

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥25.00 in 2015 to the most recent total annual payment of ¥60.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Company Could Face Some Challenges Growing The Dividend

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 Unipres has been growing its earnings per share at 20% a year over the past five years. It's not an ideal situation that the company isn't turning a profit but the growth recently is a positive sign. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 1 warning sign for Unipres that investors need to be conscious of moving forward. Is Unipres 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.