Traders HoldingsLtd (TSE:8704) Is Increasing Its Dividend To ¥20.00

The board of Traders Holdings Co.,Ltd. (TSE:8704) has announced that the dividend on 27th of June will be increased to ¥20.00, which will be 25% higher than last year's payment of ¥16.00 which covered the same period. Based on this payment, the dividend yield for the company will be 3.1%, which is fairly typical for the industry.

View our latest analysis for Traders HoldingsLtd

Traders HoldingsLtd's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Traders HoldingsLtd 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.

If the trend of the last few years continues, EPS will grow by 11.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

Traders HoldingsLtd Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The annual payment during the last 4 years was ¥10.00 in 2021, and the most recent fiscal year payment was ¥28.00. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Traders HoldingsLtd has been growing its earnings per share at 11% a year over the past five years. Traders HoldingsLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Traders HoldingsLtd's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Traders HoldingsLtd that investors need to be conscious of moving forward. Is Traders 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.