Heiwa (TSE:6412) Is Due To Pay A Dividend Of ¥40.00

Heiwa Corporation (TSE:6412) has announced that it will pay a dividend of ¥40.00 per share on the 9th of December. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

See our latest analysis for Heiwa

Heiwa's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Heiwa's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 4.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

Heiwa Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥60.00 in 2014, and the most recent fiscal year payment was ¥80.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 4.3% per annum over the last five years, which admittedly is a bit slow. Growth of 4.3% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Heiwa's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Heiwa is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Heiwa that investors should take into consideration. 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.