QB Net HoldingsLtd (TSE:6571) Is Increasing Its Dividend To ¥35.00

QB Net Holdings Co.,Ltd.'s (TSE:6571) dividend will be increasing from last year's payment of the same period to ¥35.00 on 29th of September. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for QB Net HoldingsLtd

QB Net HoldingsLtd's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by QB Net HoldingsLtd's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 23.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

QB Net HoldingsLtd's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 7 years was ¥18.00 in 2018, and the most recent fiscal year payment was ¥35.00. This implies that the company grew its distributions at a yearly rate of about 10.0% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. QB Net HoldingsLtd's EPS has fallen by approximately 11% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On QB Net HoldingsLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think QB Net HoldingsLtd will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for QB Net HoldingsLtd that investors need to be conscious of moving forward. Is QB Net HoldingsLtd 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.