Meiwa (TSE:8103) Has Announced That It Will Be Increasing Its Dividend To ¥29.00

Meiwa Corporation's (TSE:8103) dividend will be increasing from last year's payment of the same period to ¥29.00 on 26th of June. This will take the annual payment to 3.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Meiwa

Meiwa's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Meiwa's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 6.0% over the next 12 months if recent trends continue. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 87%, meaning that most of the company's earnings is being paid out to shareholders.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥6.00 total annually to ¥27.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Meiwa's earnings per share has fallen at approximately 6.0% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Meiwa has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is Meiwa 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.