Persol HoldingsLtd's (TSE:2181) Upcoming Dividend Will Be Larger Than Last Year's

Persol Holdings Co.,Ltd.'s (TSE:2181) dividend will be increasing from last year's payment of the same period to ¥5.50 on 10th of December. This will take the annual payment to 3.8% of the stock price, which is above what most companies in the industry pay.

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Persol HoldingsLtd's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Persol HoldingsLtd was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 11.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 71%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Persol HoldingsLtd

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. Since 2015, the annual payment back then was ¥0.933, compared to the most recent full-year payment of ¥11.00. This works out to be a compound annual growth rate (CAGR) of approximately 28% 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.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Persol HoldingsLtd has grown earnings per share at 38% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Persol HoldingsLtd Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. For instance, we've picked out 1 warning sign for Persol HoldingsLtd that investors should take into consideration. Is Persol HoldingsLtd 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.