HeiwadoLtd (TSE:8276) Will Pay A Dividend Of ¥30.00

Heiwado Co.,Ltd.'s (TSE:8276) investors are due to receive a payment of ¥30.00 per share on 19th of May. This will take the dividend yield to an attractive 2.3%, providing a nice boost to shareholder returns.

See our latest analysis for HeiwadoLtd

HeiwadoLtd's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, HeiwadoLtd's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 9.6% over the next year. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥27.00 in 2014, and the most recent fiscal year payment was ¥53.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. HeiwadoLtd might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. HeiwadoLtd hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On HeiwadoLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for HeiwadoLtd that you should be aware of before investing. 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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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.