WatahanLtd (TSE:3199) Is Paying Out A Larger Dividend Than Last Year

Watahan & Co.,Ltd. (TSE:3199) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of June to ¥24.00. The payment will take the dividend yield to 1.5%, which is in line with the average for the industry.

Check out our latest analysis for WatahanLtd

WatahanLtd's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. 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 an extended history of paying stable dividends. The annual payment during the last 10 years was ¥7.50 in 2015, and the most recent fiscal year payment was ¥24.00. This means that it has been growing its distributions at 12% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

WatahanLtd Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. WatahanLtd has impressed us by growing EPS at 8.9% per year over the past five years. WatahanLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for WatahanLtd 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.