Premium Water HoldingsInc's (TSE:2588) Shareholders Will Receive A Bigger Dividend Than Last Year

Premium Water Holdings,Inc. (TSE:2588) has announced that it will be increasing its dividend from last year's comparable payment on the 20th of June to ¥50.00. This takes the dividend yield to 3.2%, which shareholders will be pleased with.

Check out our latest analysis for Premium Water HoldingsInc

Premium Water HoldingsInc's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Premium Water HoldingsInc'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 50.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

Premium Water HoldingsInc Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The annual payment during the last 3 years was ¥10.00 in 2021, and the most recent fiscal year payment was ¥100.00. This implies that the company grew its distributions at a yearly rate of about 115% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Premium Water HoldingsInc has been growing its earnings per share at 51% a year over the past five years. Premium Water HoldingsInc is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Premium Water HoldingsInc Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Premium Water HoldingsInc 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.