MEITEC Group Holdings' (TSE:9744) Upcoming Dividend Will Be Larger Than Last Year's

MEITEC Group Holdings Inc.'s (TSE:9744) dividend will be increasing from last year's payment of the same period to ¥97.00 on 23rd of June. This will take the annual payment to 5.2% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for MEITEC Group Holdings

MEITEC Group Holdings' Projections Indicate Future Payments May Be Unsustainable

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, MEITEC Group Holdings was paying out 91% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

Earnings per share is forecast to rise by 5.0% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 126% over the next year.

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 ¥24.00 in 2015, and the most recent fiscal year payment was ¥155.00. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See MEITEC Group Holdings' Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. MEITEC Group Holdings has seen EPS rising for the last five years, at 8.0% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On MEITEC Group Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Strong earnings growth means MEITEC Group Holdings has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 1 warning sign for MEITEC Group Holdings that investors need to be conscious of moving forward. Is MEITEC Group 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.