Wakachiku Construction (TSE:1888) Will Pay A Larger Dividend Than Last Year At ¥126.00

Wakachiku Construction Co., Ltd. (TSE:1888) has announced that it will be increasing its periodic dividend on the 6th of June to ¥126.00, which will be 5.0% higher than last year's comparable payment amount of ¥120.00. Based on this payment, the dividend yield for the company will be 3.2%, which is fairly typical for the industry.

Check out our latest analysis for Wakachiku Construction

Wakachiku Construction's Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by Wakachiku Construction's earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 1.1% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 61%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Wakachiku Construction 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 ¥20.00 in 2015 to the most recent total annual payment of ¥120.00. This means that it has been growing its distributions at 20% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Unfortunately, Wakachiku Construction's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Wakachiku Construction that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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