Warabeya Nichiyo Holdings (TSE:2918) Will Pay A Dividend Of ¥45.00

Warabeya Nichiyo Holdings Co., Ltd.'s (TSE:2918) investors are due to receive a payment of ¥45.00 per share on 17th of November. This makes the dividend yield 3.5%, which will augment investor returns quite nicely.

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Warabeya Nichiyo Holdings' Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Warabeya Nichiyo Holdings' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 25.4%. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Warabeya Nichiyo Holdings

Warabeya Nichiyo Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. 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. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Warabeya Nichiyo Holdings has impressed us by growing EPS at 47% 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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Warabeya Nichiyo Holdings is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Warabeya Nichiyo Holdings that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.