GreensLtd's (TSE:6547) Shareholders Will Receive A Bigger Dividend Than Last Year

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 ¥20.00. This takes the dividend yield to 1.0%, which shareholders will be pleased with.

See our latest analysis for GreensLtd

GreensLtd's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, GreensLtd was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to fall by 20.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 6.0%, 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. Since 2017, the annual payment back then was ¥12.50, compared to the most recent full-year payment of ¥20.00. This means that it has been growing its distributions at 6.9% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

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. GreensLtd has seen EPS rising for the last five years, at 30% per annum. 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.

GreensLtd 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 generating plenty of cash, and the earnings also quite easily cover the distributions. 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 of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, GreensLtd has 4 warning signs (and 1 which is concerning) we think you should know about. 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.