Yondoshi Holdings (TSE:8008) Is Due To Pay A Dividend Of ¥41.50

Yondoshi Holdings Inc.'s (TSE:8008) investors are due to receive a payment of ¥41.50 per share on 11th of November. The dividend yield will be 4.3% based on this payment which is still above the industry average.

View our latest analysis for Yondoshi Holdings

Yondoshi 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. Prior to this announcement, Yondoshi Holdings' dividend was only 67% of earnings, however it was paying out 112% 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.

Over the next year, EPS is forecast to expand by 10.5%. If the dividend continues on its recent course, the payout ratio in 12 months could be 134%, which is a bit high and could start applying pressure to the balance sheet.

Yondoshi Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥25.00 in 2014 to the most recent total annual payment of ¥83.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Is Doubtful

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Yondoshi Holdings has seen earnings per share falling at 7.1% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Yondoshi Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yondoshi Holdings' payments, as there could be some issues with sustaining them into the future. While Yondoshi Holdings is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Yondoshi Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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