Eagle IndustryLtd (TSE:6486) Is Increasing Its Dividend To ¥55.00

Eagle Industry Co.,Ltd.'s (TSE:6486) dividend will be increasing from last year's payment of the same period to ¥55.00 on 3rd of December. This takes the dividend yield to 4.3%, which shareholders will be pleased with.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Eagle IndustryLtd's stock price has increased by 37% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Eagle IndustryLtd's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, Eagle IndustryLtd was paying out a very large proportion of what it was earning and 217% 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.

Over the next year, EPS could expand by 76.3% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 56% which brings it into quite a comfortable range.

Check out our latest analysis for Eagle IndustryLtd

Eagle IndustryLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥40.00 in 2015, and the most recent fiscal year payment was ¥110.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Could Be Constrained

Investors could be attracted to the stock based on the quality of its payment history. Eagle IndustryLtd has seen EPS rising for the last five years, at 76% per annum. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Eagle IndustryLtd hasn't been doing.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Eagle IndustryLtd's payments are rock solid. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Eagle IndustryLtd that investors should take into consideration. 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.