ZENKOKU HOSHOLtd (TSE:7164) Is Increasing Its Dividend To ¥197.00

ZENKOKU HOSHO Co.,Ltd.'s (TSE:7164) dividend will be increasing from last year's payment of the same period to ¥197.00 on 17th of June. Based on this payment, the dividend yield for the company will be 3.6%, which is fairly typical for the industry.

Check out our latest analysis for ZENKOKU HOSHOLtd

ZENKOKU HOSHOLtd's Payment Could Potentially Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, ZENKOKU HOSHOLtd's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 6.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 43% by next year, which is in a pretty sustainable range.

ZENKOKU HOSHOLtd Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of ¥148.00 in 2022 to the most recent total annual payment of ¥197.00. This means that it has been growing its distributions at 15% per annum over that time. ZENKOKU HOSHOLtd 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.

ZENKOKU HOSHOLtd May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Although it's important to note that ZENKOKU HOSHOLtd's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. The company has been growing at a pretty soft 0.4% per annum, and is paying out quite a lot of its earnings to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On ZENKOKU HOSHOLtd's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 ZENKOKU HOSHOLtd analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is ZENKOKU HOSHOLtd not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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