Eagle IndustryLtd's (TSE:6486) Dividend Will Be ¥50.00

Eagle Industry Co.,Ltd. (TSE:6486) will pay a dividend of ¥50.00 on the 26th of June. This makes the dividend yield 4.9%, which is above the industry average.

See our latest analysis for Eagle IndustryLtd

Eagle IndustryLtd's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Eagle IndustryLtd was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 85% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

EPS is set to grow by 3.8% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 79%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Eagle IndustryLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from ¥14.00 total annually to ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Eagle IndustryLtd has only grown its earnings per share at 3.8% per annum over the past five years. While EPS growth is quite low, Eagle IndustryLtd has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Eagle IndustryLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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 probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Eagle IndustryLtd in our latest insider ownership analysis. 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.