IR Japan Holdings (TSE:6035) Is Due To Pay A Dividend Of ¥10.00

IR Japan Holdings, Ltd. (TSE:6035) has announced that it will pay a dividend of ¥10.00 per share on the 19th of June. The yield is still above the industry average at 2.7%.

View our latest analysis for IR Japan Holdings

IR Japan Holdings' Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. At the time of the last dividend payment, IR Japan Holdings was paying out a very large proportion of what it was earning and 444% 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 20.8% 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 93%, 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 2015, and the most recent fiscal year payment was ¥20.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Potential Is Shaky

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. Over the past five years, it looks as though IR Japan Holdings' EPS has declined at around 21% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good 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. Just as an example, we've come across 3 warning signs for IR Japan Holdings you should be aware of, and 1 of them shouldn't be ignored. 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.