CE HoldingsLtd's (TSE:4320) Shareholders Will Receive A Bigger Dividend Than Last Year

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 will take the annual payment to 2.6% of the stock price, which is above what most companies in the industry pay.

View 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. 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.

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

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥2.50, compared to the most recent full-year payment of ¥15.00. This means that it has been growing its distributions at 20% per annum over that time. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. CE HoldingsLtd has seen EPS rising for the last five years, at 10% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On CE HoldingsLtd's Dividend

Overall, we always like to see the dividend being raised, but we don't think CE HoldingsLtd will make a great income stock. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for CE HoldingsLtd 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.

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