Neturen (TSE:5976) Is Increasing Its Dividend To ¥34.00

Neturen Co., Ltd.'s (TSE:5976) dividend will be increasing from last year's payment of the same period to ¥34.00 on 29th of June. This will take the dividend yield to an attractive 5.6%, providing a nice boost to shareholder returns.

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Neturen's 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. Prior to this announcement, the company was paying out 122% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS could expand by 12.7% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 131%, which is a bit high and could start applying pressure to the balance sheet.

See our latest analysis for Neturen

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 ¥14.00 in 2015 to the most recent total annual payment of ¥68.00. This means that it has been growing its distributions at 17% 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.

Neturen's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Neturen has been growing its earnings per share at 13% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Neturen's payments are rock solid. Strong earnings growth means Neturen has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Neturen 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Neturen (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.