Heiwa PaperLtd (TSE:9929) Has Announced A Dividend Of ¥6.00

The board of Heiwa Paper Co.,Ltd. (TSE:9929) has announced that it will pay a dividend on the 4th of December, with investors receiving ¥6.00 per share. This means the dividend yield will be fairly typical at 2.7%.

View our latest analysis for Heiwa PaperLtd

Heiwa PaperLtd's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. At the time of the last dividend payment, Heiwa PaperLtd was paying out a very large proportion of what it was earning and 147% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Looking forward, could fall by 9.2% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 92%, meaning that most of the company's earnings is being paid out to shareholders.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥10.00 in 2014, and the most recent fiscal year payment was ¥12.00. This means that it has been growing its distributions at 1.8% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Heiwa PaperLtd's earnings per share has shrunk at approximately 9.2% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Heiwa PaperLtd's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 3 warning signs for Heiwa PaperLtd that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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