Japan Post Holdings (TSE:6178) Has Affirmed Its Dividend Of ¥25.00

The board of Japan Post Holdings Co., Ltd. (TSE:6178) has announced that it will pay a dividend on the 20th of June, with investors receiving ¥25.00 per share. This payment means that the dividend yield will be 3.4%, which is around the industry average.

See our latest analysis for Japan Post Holdings

Japan Post Holdings' Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Japan Post Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 16.9%. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Japan Post Holdings Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The last annual payment of ¥50.00 was flat on the annual payment from9 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Japan Post Holdings' EPS has declined at around 5.1% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Japan Post Holdings' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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. Given that earnings are not growing, the dividend does not look nearly so attractive. See if the 7 analysts are forecasting a turnaround in our free collection of analyst estimates here. 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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