Wacoal Holdings' (TSE:3591) Dividend Will Be ¥50.00

The board of Wacoal Holdings Corp. (TSE:3591) has announced that it will pay a dividend of ¥50.00 per share on the 5th of June. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Wacoal Holdings

Wacoal Holdings Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This makes us feel that the dividend will be hard to maintain.

Earnings per share is forecast to rise by 105.9% 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 getting very high over the next year.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥56.00 in 2014 to the most recent total annual payment of ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Wacoal Holdings might have put its house in order since then, but we remain cautious.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Wacoal Holdings' earnings per share has shrunk at 12% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

We're Not Big Fans Of Wacoal Holdings' Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Wacoal Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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