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

The board of Greens Co.,Ltd. (TSE:6547) has announced that it will be paying its dividend of ¥27.00 on the 27th of September, an increased payment from last year's comparable dividend. This makes the dividend yield 1.1%, which is above the industry average.

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GreensLtd's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, GreensLtd was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 4.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 7.5%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Check out our latest analysis for GreensLtd

GreensLtd's Dividend Has Lacked Consistency

It's comforting to see that GreensLtd has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the dividend has gone from ¥12.50 total annually to ¥27.00. This means that it has been growing its distributions at 10% per annum over that time. GreensLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. GreensLtd has seen EPS rising for the last five years, at 36% 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.

We Really Like GreensLtd's Dividend

Overall, a dividend increase is always good, and we think that GreensLtd is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for GreensLtd that investors should know about before committing capital to this stock. 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.