Itochu EnexLtd (TSE:8133) Is Paying Out A Larger Dividend Than Last Year

Itochu Enex Co.,Ltd. (TSE:8133) will increase its dividend on the 20th of June to ¥30.00, which is 7.1% higher than last year's payment from the same period of ¥28.00. This makes the dividend yield about the same as the industry average at 3.3%.

See our latest analysis for Itochu EnexLtd

Itochu EnexLtd's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Itochu EnexLtd's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share could rise by 2.3% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

Itochu EnexLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from ¥16.00 total annually to ¥56.00. This means that it has been growing its distributions at 13% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Itochu EnexLtd 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. Earnings have grown at around 2.3% a year for the past five years, which isn't massive but still better than seeing them shrink. Itochu EnexLtd is struggling to find viable investments, so it is returning more 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.

Itochu EnexLtd Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Itochu EnexLtd is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Itochu EnexLtd in our latest insider ownership analysis. Is Itochu EnexLtd 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.