CE HoldingsLtd's (TSE:4320) Dividend Will Be Increased To ¥15.00

The board of CE Holdings Co.,Ltd. (TSE:4320) has announced that it will be paying its dividend of ¥15.00 on the 23rd of December, an increased payment from last year's comparable dividend. This makes the dividend yield 2.7%, which is above the industry average.

See our latest analysis for CE HoldingsLtd

CE HoldingsLtd's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. CE HoldingsLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 10.4% 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 42% by next year, which we think can be pretty sustainable going forward.

CE HoldingsLtd Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from ¥2.50 total annually to ¥15.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. CE HoldingsLtd has seen EPS rising for the last five years, at 10% per annum. CE HoldingsLtd definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On CE HoldingsLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for CE HoldingsLtd that investors should know about before committing capital to this stock. 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.