Warabeya Nichiyo Holdings (TSE:2918) Has Affirmed Its Dividend Of ¥45.00

The board of Warabeya Nichiyo Holdings Co., Ltd. (TSE:2918) has announced that it will pay a dividend on the 17th of November, with investors receiving ¥45.00 per share. The dividend yield will be 4.0% based on this payment which is still above the industry average.

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Warabeya Nichiyo Holdings' 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. Based on the last payment, Warabeya Nichiyo Holdings' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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 22.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 53% by next year, which is in a pretty sustainable range.

See our latest analysis for Warabeya Nichiyo Holdings

Warabeya Nichiyo Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from ¥40.00 total annually to ¥90.00. This implies that the company grew its distributions at a yearly rate of about 8.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Warabeya Nichiyo Holdings has impressed us by growing EPS at 22% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Warabeya Nichiyo Holdings could prove to be a strong dividend payer.

Our Thoughts On Warabeya Nichiyo Holdings' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Warabeya Nichiyo Holdings that you should be aware of before investing. Is Warabeya Nichiyo Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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