HeiwadoLtd (TSE:8276) Will Pay A Larger Dividend Than Last Year At ¥30.00

Heiwado Co.,Ltd.'s (TSE:8276) dividend will be increasing from last year's payment of the same period to ¥30.00 on 1st of November. This will take the dividend yield to an attractive 2.5%, providing a nice boost to shareholder returns.

View our latest analysis for HeiwadoLtd

HeiwadoLtd's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, HeiwadoLtd was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 90% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

The next year is set to see EPS grow by 34.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

HeiwadoLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥27.00 in 2014, and the most recent fiscal year payment was ¥60.00. This means that it has been growing its distributions at 8.3% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

HeiwadoLtd May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. However, HeiwadoLtd's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On HeiwadoLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think HeiwadoLtd will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. 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. As an example, we've identified 1 warning sign for HeiwadoLtd that you should be aware of before investing. Is HeiwadoLtd not quite the opportunity you were looking for? Why not check out our selection of top 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.

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