CURVES HOLDINGS (TSE:7085) Will Pay A Larger Dividend Than Last Year At ¥6.00

CURVES HOLDINGS Co., Ltd. (TSE:7085) will increase its dividend from last year's comparable payment on the 13th of May to ¥6.00. This will take the dividend yield to an attractive 1.7%, providing a nice boost to shareholder returns.

See our latest analysis for CURVES HOLDINGS

CURVES HOLDINGS' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, CURVES HOLDINGS was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 40.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be , which is in the range that makes us comfortable with the sustainability of the dividend.

CURVES HOLDINGS Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The annual payment during the last 4 years was ¥2.00 in 2020, and the most recent fiscal year payment was ¥12.00. This works out to be a compound annual growth rate (CAGR) of approximately 57% a year over that time. CURVES HOLDINGS has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though CURVES HOLDINGS' EPS has declined at around 92% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think CURVES HOLDINGS' payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for CURVES HOLDINGS that investors should take into consideration. 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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