Eagle IndustryLtd (TSE:6486) Has Affirmed Its Dividend Of ¥50.00

The board of Eagle Industry Co.,Ltd. (TSE:6486) has announced that it will pay a dividend of ¥50.00 per share on the 3rd of December. This means the annual payment is 5.0% of the current stock price, which is above the average for the industry.

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Eagle IndustryLtd's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Eagle IndustryLtd was paying out quite a large proportion of both earnings and cash flow, with the dividend being 191% 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 could rise by 13.4% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 86%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Check out our latest analysis for Eagle IndustryLtd

Eagle IndustryLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥40.00, compared to the most recent full-year payment of ¥100.00. This means that it has been growing its distributions at 9.6% per annum over that time. 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.

Eagle IndustryLtd's Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Eagle IndustryLtd has grown earnings per share at 13% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Eagle IndustryLtd's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Eagle IndustryLtd'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 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Eagle IndustryLtd (of which 1 makes us a bit uncomfortable!) you should know about. Is Eagle IndustryLtd 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.