IR Japan Holdings (TSE:6035) Has Announced A Dividend Of ¥15.00

The board of IR Japan Holdings, Ltd. (TSE:6035) has announced that it will pay a dividend of ¥15.00 per share on the 19th of June. The dividend yield of 6.0% is still a nice boost to shareholder returns, despite the cut.

See our latest analysis for IR Japan Holdings

IR Japan Holdings Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 314% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

If the company can't turn things around, EPS could fall by 4.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 96%, which could put the dividend under pressure if earnings don't start to improve.

IR Japan Holdings' Dividend Has Lacked Consistency

IR Japan Holdings has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the dividend has gone from ¥10.00 total annually to ¥83.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. 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.

IR Japan Holdings May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, IR Japan Holdings' earnings per share has shrunk at approximately 4.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

IR Japan Holdings' Dividend Doesn't Look Great

In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the 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. To that end, IR Japan Holdings has 4 warning signs (and 2 which don't sit too well with us) we think you should know about. Is IR Japan Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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