Qol Holdings (TSE:3034) Has Announced That It Will Be Increasing Its Dividend To ¥23.00

Qol Holdings Co., Ltd. (TSE:3034) has announced that it will be increasing its dividend from last year's comparable payment on the 2nd of December to ¥23.00. This will take the annual payment to 2.2% of the stock price, which is above what most companies in the industry pay.

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Qol Holdings' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Qol Holdings' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 14.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.

See our latest analysis for Qol Holdings

Qol Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥20.00, compared to the most recent full-year payment of ¥46.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.7% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Qol Holdings has been growing its earnings per share at 12% a year over the past five years. Qol Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Qol Holdings' payments are rock solid. While Qol Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Qol 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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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.