WatahanLtd's (TSE:3199) Shareholders Will Receive A Bigger 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 ¥29.00. This takes the annual payment to 1.7% of the current stock price, which is about average for the industry.

See our latest analysis for WatahanLtd

WatahanLtd's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. WatahanLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 5.5% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

WatahanLtd Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥7.50 in 2015 to the most recent total annual payment of ¥29.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

We Could See WatahanLtd's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. WatahanLtd has impressed us by growing EPS at 5.5% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for WatahanLtd that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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