BELLSYSTEM24 Holdings (TSE:6183) Is Paying Out A Dividend Of ¥30.00

The board of BELLSYSTEM24 Holdings, Inc. (TSE:6183) has announced that it will pay a dividend on the 1st of January, with investors receiving ¥30.00 per share. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

See our latest analysis for BELLSYSTEM24 Holdings

BELLSYSTEM24 Holdings' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, BELLSYSTEM24 Holdings' dividend made up quite a large proportion of earnings but only 34% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Looking forward, earnings per share is forecast to rise by 12.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

BELLSYSTEM24 Holdings Doesn't Have A Long Payment History

It is great to see that BELLSYSTEM24 Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2015, the annual payment back then was ¥18.00, compared to the most recent full-year payment of ¥60.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. BELLSYSTEM24 Holdings has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, BELLSYSTEM24 Holdings has only grown its earnings per share at 2.6% per annum over the past five years. BELLSYSTEM24 Holdings' earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

Overall, we think BELLSYSTEM24 Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 example, we've picked out 3 warning signs for BELLSYSTEM24 Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.