DYNAM JAPAN HOLDINGS' (HKG:6889) Dividend Will Be Reduced To HK$0.16

DYNAM JAPAN HOLDINGS Co., Ltd. (HKG:6889) is reducing its dividend to HK$0.16 on the 12th of January. However, the dividend yield of 5.3% is still a decent boost to shareholder returns.

Check out our latest analysis for DYNAM JAPAN HOLDINGS

DYNAM JAPAN HOLDINGS' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, DYNAM JAPAN HOLDINGS was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 11.1% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 5.4%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

DYNAM JAPAN HOLDINGS' Dividend Has Lacked Consistency

Looking back, DYNAM JAPAN HOLDINGS' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from JP¥11.50 in 2012 to the most recent annual payment of JP¥4.00. The dividend has fallen 65% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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 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. However, there are other things to consider for investors when analysing stock performance. To that end, DYNAM JAPAN HOLDINGS has 3 warning signs (and 1 which is potentially serious) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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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