Meiji Holdings (TSE:2269) Is Due To Pay A Dividend Of ¥50.00

Meiji Holdings Co., Ltd.'s (TSE:2269) investors are due to receive a payment of ¥50.00 per share on 5th of June. This makes the dividend yield 3.1%, which is above the industry average.

Check out our latest analysis for Meiji Holdings

Meiji Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last dividend, Meiji Holdings is earning enough to cover the payment, but then it makes up 123% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 8.5% over the next year. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.

Meiji 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 ¥20.00 in 2014 to the most recent total annual payment of ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Meiji Holdings hasn't seen much change in its earnings per share over the last five years.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Meiji Holdings that investors should know about before committing capital to this stock. Is Meiji Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.