Wakachiku Construction's (TSE:1888) Dividend Will Be Increased To ¥126.00

Wakachiku Construction Co., Ltd.'s (TSE:1888) periodic dividend will be increasing on the 6th of June to ¥126.00, with investors receiving 5.0% more than last year's ¥120.00. The payment will take the dividend yield to 3.3%, which is in line with the average for the industry.

See our latest analysis for Wakachiku Construction

Wakachiku Construction's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite easily covered by Wakachiku Construction's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

EPS is set to fall by 0.9% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 52%, 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. Since 2015, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥120.00. This means that it has been growing its distributions at 20% per annum 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.

Wakachiku Construction May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. 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.

Our Thoughts On Wakachiku Construction's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Wakachiku Construction stock. 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.