Chikaranomoto HoldingsLtd (TSE:3561) Will Pay A Larger Dividend Than Last Year At ¥10.00

The board of Chikaranomoto Holdings Co.,Ltd. (TSE:3561) has announced that it will be paying its dividend of ¥10.00 on the 8th of December, an increased payment from last year's comparable dividend. This will take the annual payment to 1.3% of the stock price, which is above what most companies in the industry pay.

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Chikaranomoto HoldingsLtd's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Chikaranomoto HoldingsLtd's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 7.7%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Chikaranomoto HoldingsLtd

Chikaranomoto HoldingsLtd's Dividend Has Lacked Consistency

Chikaranomoto HoldingsLtd has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 8 years was ¥4.00 in 2017, and the most recent fiscal year payment was ¥20.00. This means that it has been growing its distributions at 22% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Chikaranomoto HoldingsLtd has grown earnings per share at 57% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Chikaranomoto HoldingsLtd's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Chikaranomoto HoldingsLtd in our latest insider ownership analysis. 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.