Chikaranomoto Holdings' (TSE:3561) Dividend Will Be ¥10.00

Chikaranomoto Holdings Co., Ltd. (TSE:3561) will pay a dividend of ¥10.00 on the 9th of June. This will take the dividend yield to an attractive 1.5%, providing a nice boost to shareholder returns.

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Chikaranomoto Holdings' Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Chikaranomoto Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 3.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

View our latest analysis for Chikaranomoto Holdings

Chikaranomoto Holdings' Dividend Has Lacked Consistency

It's comforting to see that Chikaranomoto Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2016, the dividend has gone from ¥4.00 total annually to ¥20.00. This means that it has been growing its distributions at 20% per annum over that time. Chikaranomoto Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Chikaranomoto Holdings has impressed us by growing EPS at 54% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Chikaranomoto Holdings Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Chikaranomoto Holdings in our latest insider ownership analysis. 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.