WatahanLtd (TSE:3199) Has Announced That It Will Be Increasing Its Dividend To ¥24.00

Watahan & Co.,Ltd.'s (TSE:3199) dividend will be increasing from last year's payment of the same period to ¥24.00 on 9th of June. This makes the dividend yield about the same as the industry average at 1.6%.

View our latest analysis for WatahanLtd

WatahanLtd's Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, WatahanLtd was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 8.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

WatahanLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥7.50, compared to the most recent full-year payment of ¥24.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that WatahanLtd has grown earnings per share at 8.9% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On WatahanLtd's Dividend

In summary, while it's always good to see the dividend being raised, we don't think WatahanLtd's payments are rock solid. While WatahanLtd 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.

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 2 warning signs for WatahanLtd that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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