Chikaranomoto HoldingsLtd's (TSE:3561) Shareholders Will Receive A Bigger Dividend Than Last Year

Chikaranomoto Holdings Co.,Ltd. (TSE:3561) has announced that it will be increasing its dividend from last year's comparable payment on the 8th of December to ¥10.00. This takes the dividend yield to 1.3%, which shareholders will be pleased with.

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

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Chikaranomoto HoldingsLtd's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 7.7% over the next year. 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

It's comforting to see that Chikaranomoto HoldingsLtd has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the dividend has gone from ¥4.00 total annually to ¥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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. Chikaranomoto HoldingsLtd has impressed us by growing EPS at 57% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

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. All of these factors considered, we think this has solid potential as a dividend stock.

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. Now, if you want to look closer, it would be worth checking out our free research on Chikaranomoto HoldingsLtd management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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