Dowa Holdings (TSE:5714) Is Increasing Its Dividend To ¥150.00

The board of Dowa Holdings Co., Ltd. (TSE:5714) has announced that the dividend on 14th of June will be increased to ¥150.00, which will be 15% higher than last year's payment of ¥130.00 which covered the same period. Based on this payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.

See our latest analysis for Dowa Holdings

Dowa Holdings' Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Dowa Holdings' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 2.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

Dowa Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥75.00 in 2015 to the most recent total annual payment of ¥130.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.7% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dowa Holdings Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Dowa Holdings has seen EPS rising for the last five years, at 9.1% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Dowa Holdings' prospects of growing its dividend payments in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Dowa Holdings will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Dowa Holdings is a great stock to add to your portfolio if income is your focus.

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. For example, we've picked out 1 warning sign for Dowa Holdings that investors should know about before committing capital to this stock. Is Dowa Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.