HeiwadoLtd's (TSE:8276) Upcoming Dividend Will Be Larger Than Last Year's

The board of Heiwado Co.,Ltd. (TSE:8276) has announced that it will be paying its dividend of ¥30.00 on the 1st of November, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.6%, which shareholders will be pleased with.

See our latest analysis for HeiwadoLtd

HeiwadoLtd's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, based ont he last payment, HeiwadoLtd was earning enough to cover the dividend pretty comfortably. 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.

Over the next year, EPS is forecast to expand by 9.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

HeiwadoLtd 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 ¥27.00 in 2014 to the most recent total annual payment of ¥60.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

HeiwadoLtd May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Although it's important to note that HeiwadoLtd's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

Overall, we always like to see the dividend being raised, but we don't think HeiwadoLtd will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments HeiwadoLtd has been making. 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 HeiwadoLtd 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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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.