ENEOS Holdings' (TSE:5020) Upcoming Dividend Will Be Larger Than Last Year's

ENEOS Holdings, Inc.'s (TSE:5020) dividend will be increasing from last year's payment of the same period to ¥15.00 on 1st of December. This makes the dividend yield about the same as the industry average at 3.9%.

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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. This gives us some comfort about the level of the dividend payments.

Analysts are expecting EPS to grow by 36.3% over the next 12 months. It's encouraging to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. However, the positive cash flow ratio gives us some comfort about the sustainability of the dividend.

See our latest analysis for ENEOS Holdings

ENEOS Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the annual payment back then was ¥16.00, compared to the most recent full-year payment of ¥30.00. This means that it has been growing its distributions at 6.5% per annum 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.

The Company Could Face Some Challenges Growing The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that ENEOS Holdings has been growing its earnings per share at 23% a year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ENEOS Holdings will make a great income stock. 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 be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for ENEOS Holdings that you should be aware of before investing. Is ENEOS Holdings 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.