Japan Elevator Service HoldingsLtd's (TSE:6544) Upcoming Dividend Will Be Larger Than Last Year's

The board of Japan Elevator Service Holdings Co.,Ltd. (TSE:6544) has announced that it will be paying its dividend of ¥23.00 on the 26th of June, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

See our latest analysis for Japan Elevator Service HoldingsLtd

Japan Elevator Service HoldingsLtd's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, Japan Elevator Service HoldingsLtd was paying only paying out a fraction of earnings, but the payment was a massive 112% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 101.5% over the next year. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Japan Elevator Service HoldingsLtd Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2017, the annual payment back then was ¥1.00, compared to the most recent full-year payment of ¥23.00. This means that it has been growing its distributions at 57% per annum over that time. Japan Elevator Service HoldingsLtd 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.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Japan Elevator Service HoldingsLtd has grown earnings per share at 24% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Japan Elevator Service HoldingsLtd is earning enough to cover the payments, the cash flows are lacking. We don't think Japan Elevator Service HoldingsLtd is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 Japan Elevator Service HoldingsLtd analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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