ARE Holdings, Inc. (TSE:5857) has announced that it will pay a dividend of ¥45.00 per share on the 5th of June. This makes the dividend yield 4.7%, which will augment investor returns quite nicely.
See our latest analysis for ARE Holdings
ARE Holdings' Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, ARE Holdings was paying out 88% of earnings, but a comparatively small 48% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Over the next year, EPS is forecast to expand by 22.0%. If the dividend continues along recent trends, we estimate the payout ratio could reach 82%, which is on the higher side, but certainly still feasible.
ARE Holdings Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥90.00. This means that it has been growing its distributions at 12% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
ARE Holdings May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Unfortunately, ARE Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Our Thoughts On ARE Holdings' Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for ARE Holdings (of which 1 is significant!) 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.
About TSE:5857
ARE Holdings
Engages in recycling and selling precious and rare metals in Japan, rest of Asia, and North America.
Adequate balance sheet average dividend payer.
