Pola Orbis Holdings (TSE:4927) Will Pay A Dividend Of ¥31.00

The board of Pola Orbis Holdings Inc. (TSE:4927) has announced that it will pay a dividend on the 31st of March, with investors receiving ¥31.00 per share. This means the annual payment is 3.6% of the current stock price, which is above the average for the industry.

See our latest analysis for Pola Orbis Holdings

Pola Orbis Holdings' Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

The next 12 months is set to see EPS grow by 12.2%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 148%, which probably can't continue without putting some pressure on the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥21.75 in 2014, and the most recent fiscal year payment was ¥52.00. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Pola Orbis Holdings' Dividend Might Lack Growth

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Pola Orbis Holdings has grown earnings per share at 31% per year over the past five years. While EPS is growing rapidly, Pola Orbis Holdings paid out a very high 157% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Pola Orbis Holdings' payments, as there could be some issues with sustaining them into the future. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Pola Orbis Holdings that investors should take into consideration. Is Pola Orbis Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.