Wacoal Holdings (TSE:3591) Has Announced A Dividend Of ¥50.00

Wacoal Holdings Corp. (TSE:3591) has announced that it will pay a dividend of ¥50.00 per share on the 8th of June. This payment means that the dividend yield will be 2.2%, which is around the industry average.

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Wacoal Holdings' Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Wacoal Holdings' dividend was only 49% of earnings, however it was paying out 168% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to fall by 34.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 73%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for Wacoal Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥66.00 in 2015, and the most recent fiscal year payment was ¥100.00. This implies that the company grew its distributions at a yearly rate of about 4.2% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Wacoal Holdings has impressed us by growing EPS at 8.1% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Wacoal Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Wacoal Holdings' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. To that end, Wacoal Holdings has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is Wacoal 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.