Eagle IndustryLtd's (TSE:6486) Shareholders Will Receive A Bigger Dividend Than Last Year

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 makes the dividend yield 4.4%, which is above the industry average.

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 32% 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 Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Eagle IndustryLtd's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 217% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

If the trend of the last few years continues, EPS will grow by 76.3% over the next 12 months. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 56% which would be quite comfortable going to take the dividend forward.

See our latest analysis for Eagle IndustryLtd

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. Since 2015, the dividend has gone from ¥40.00 total annually to ¥110.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Eagle IndustryLtd's Dividend Might Lack Growth

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. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Eagle IndustryLtd is not retaining those earnings to reinvest in growth.

Our Thoughts On Eagle IndustryLtd's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Eagle IndustryLtd's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.