Wacoal Holdings (TSE:3591) Is Due To Pay A Dividend Of ¥50.00

The board of Wacoal Holdings Corp. (TSE:3591) has announced that it will pay a dividend on the 5th of June, with investors receiving ¥50.00 per share. This makes the dividend yield 2.7%, which is above the industry average.

See our latest analysis for Wacoal Holdings

Wacoal Holdings Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Wacoal Holdings is unprofitable despite paying a dividend, and it is paying out 114% of its free cash flow. 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. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ¥56.00, compared to the most recent full-year payment of ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.0% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

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. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.

Wacoal Holdings' Dividend Doesn't Look Great

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Wacoal Holdings that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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