Envipro Holdings (TSE:5698) Has Affirmed Its Dividend Of ¥14.00

The board of Envipro Holdings Inc. (TSE:5698) has announced that it will pay a dividend of ¥14.00 per share on the 30th of September. This means the annual payment is 2.7% of the current stock price, which is above the average for the industry.

View our latest analysis for Envipro Holdings

Envipro Holdings' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Envipro Holdings was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 12.2% over the next year. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥2.50, compared to the most recent full-year payment of ¥14.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Envipro Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Envipro Holdings has impressed us by growing EPS at 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Envipro Holdings is earning enough to cover the payments, the cash flows are lacking. We don't think Envipro Holdings is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Envipro Holdings that investors need to be conscious of moving forward. 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.