Milbon (TSE:4919) Has Affirmed Its Dividend Of ¥48.00

Milbon Co., Ltd.'s (TSE:4919) investors are due to receive a payment of ¥48.00 per share on 30th of March. This means the annual payment is 3.5% of the current stock price, which is above the average for the industry.

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Milbon's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. At the time of the last dividend payment, Milbon was paying out a very large proportion of what it was earning and 144% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Earnings per share is forecast to rise by 15.9% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 80% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for Milbon

Milbon Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥34.00 in 2015, and the most recent fiscal year payment was ¥88.00. This implies that the company grew its distributions at a yearly rate of about 10.0% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Milbon has seen earnings per share falling at 2.5% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Milbon's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We don't think Milbon 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. For example, we've picked out 2 warning signs for Milbon that investors should know about before committing capital to this stock. Is Milbon 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.