TRE Holdings (TSE:9247) Has Affirmed Its Dividend Of ¥20.00

The board of TRE Holdings Corporation (TSE:9247) has announced that it will pay a dividend on the 9th of December, with investors receiving ¥20.00 per share. The dividend yield will be 2.4% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that TRE Holdings' stock price has increased by 41% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for TRE Holdings

TRE Holdings' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, TRE Holdings' dividend was only 49% of earnings, however it was paying out 860% of free cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 15.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 42%, which is in the range that makes us comfortable with the sustainability of the dividend.

TRE Holdings Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2022, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥40.00. This implies that the company grew its distributions at a yearly rate of about 41% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. In the last five years, TRE Holdings' earnings per share has shrunk at approximately 5.7% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think TRE Holdings 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. For example, we've picked out 4 warning signs for TRE Holdings that investors should know about before committing capital to this stock. Is TRE Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.