Itoham Yonekyu Holdings (TSE:2296) Has Announced That It Will Be Increasing Its Dividend To ¥125.00

Itoham Yonekyu Holdings Inc. (TSE:2296) will increase its dividend from last year's comparable payment on the 5th of June to ¥125.00. This takes the dividend yield to 2.9%, which shareholders will be pleased with.

View our latest analysis for Itoham Yonekyu Holdings

Itoham Yonekyu Holdings' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Itoham Yonekyu Holdings was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 39.0% over the next year. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Itoham Yonekyu Holdings Is Still Building Its Track Record

Itoham Yonekyu Holdings' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2017, the annual payment back then was ¥75.00, compared to the most recent full-year payment of ¥125.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

Itoham Yonekyu Holdings May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 4.4% per annum over the last five years, which admittedly is a bit slow. Growth of 4.4% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Itoham Yonekyu Holdings will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Itoham Yonekyu Holdings is a great stock to add to your portfolio if income is your focus.

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 1 warning sign for Itoham Yonekyu 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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