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

Heiwa Paper Co.,Ltd. (TSE:9929) has announced that it will pay a dividend of ¥6.00 per share on the 4th of December. This means that the annual payment will be 2.7% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Heiwa PaperLtd

Heiwa PaperLtd's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Heiwa PaperLtd's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 147% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, could fall by 8.9% 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

Although the company has a long dividend history, it has been cut 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 implies that the company grew its distributions at a yearly rate of about 1.8% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Heiwa PaperLtd has seen earnings per share falling at 8.9% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Heiwa PaperLtd's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Heiwa PaperLtd's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Heiwa PaperLtd that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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