Oji Holdings (TSE:3861) Is Due To Pay A Dividend Of ¥18.00

Oji Holdings Corporation (TSE:3861) will pay a dividend of ¥18.00 on the 5th of June. This will take the annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

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Oji Holdings' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. Generally, we think that this would be a risky long term practice.

EPS is set to grow by 23.2% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 88% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for Oji Holdings

Oji Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥10.00 total annually to ¥36.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Over the past five years, it looks as though Oji Holdings' EPS has declined at around 2.0% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Oji Holdings' Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Oji Holdings' payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Oji Holdings (of which 1 is potentially serious!) you should know about. 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.