GreensLtd (TSE:6547) Is Increasing Its Dividend To ¥23.00

Greens Co.,Ltd. (TSE:6547) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of September to ¥23.00. This will take the annual payment to 1.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for GreensLtd

GreensLtd's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, GreensLtd's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 11.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 5.6%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

GreensLtd's Dividend Has Lacked Consistency

Looking back, GreensLtd's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ¥12.50 in 2017 to the most recent total annual payment of ¥20.00. This means that it has been growing its distributions at 6.9% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. GreensLtd might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that GreensLtd has been growing its earnings per share at 30% a 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 GreensLtd'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. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for GreensLtd (1 can't be ignored!) that you should be aware of before investing. Is GreensLtd not quite the opportunity you were looking for? Why not check out our selection of top 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.

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