Eagle IndustryLtd (TSE:6486) Has Announced A Dividend Of ¥35.00

Eagle Industry Co.,Ltd. (TSE:6486) has announced that it will pay a dividend of ¥35.00 per share on the 28th of June. However, the dividend yield of 3.9% is still a decent boost to shareholder returns.

Check out our latest analysis for Eagle IndustryLtd

Eagle IndustryLtd's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Eagle IndustryLtd's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share could rise by 1.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 50% by next year, which is in a pretty sustainable range.

Eagle IndustryLtd Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥14.00 in 2014 to the most recent total annual payment of ¥70.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Eagle IndustryLtd May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, Eagle IndustryLtd's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Eagle IndustryLtd is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Eagle IndustryLtd has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Eagle IndustryLtd that investors need to be conscious of moving forward. 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.