JFE Holdings' (TSE:5411) Dividend Will Be Reduced To ¥40.00

JFE Holdings, Inc. (TSE:5411) is reducing its dividend from last year's comparable payment to ¥40.00 on the 8th of December. The dividend yield of 4.7% is still a nice boost to shareholder returns, despite the cut.

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JFE Holdings' Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, JFE Holdings' dividend was comfortably covered by both cash flow and 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 13.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 60% by next year, which is in a pretty sustainable range.

View our latest analysis for JFE Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥40.00 in 2015, and the most recent fiscal year payment was ¥80.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. JFE Holdings might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. JFE Holdings has impressed us by growing EPS at 37% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that JFE Holdings could prove to be a strong dividend payer.

JFE Holdings Looks Like A Great Dividend Stock

Overall, we think that JFE Holdings could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 4 warning signs for JFE Holdings 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.