ENEOS Holdings' (TSE:5020) Dividend Will Be ¥17.00

The board of ENEOS Holdings, Inc. (TSE:5020) has announced that it will pay a dividend on the 29th of June, with investors receiving ¥17.00 per share. Based on this payment, the dividend yield for the company will be 3.2%, which is fairly typical for the industry.

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ENEOS Holdings Might Find It Hard To Continue The Dividend

Unless the payments are sustainable, the dividend yield doesn't mean too much. While ENEOS Holdings is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Analysts are expecting EPS to grow by 38.8% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

View our latest analysis for ENEOS Holdings

ENEOS Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥16.00 in 2015 to the most recent total annual payment of ¥34.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.8% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

ENEOS Holdings May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. In the last five years, ENEOS Holdings' earnings per share has shrunk at approximately 2.4% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. 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 can turn into a longer term trend.

Our Thoughts On ENEOS Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think ENEOS Holdings' payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for ENEOS Holdings that investors need to be conscious of moving forward. 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.