Carta Holdings (TSE:3688) Is Due To Pay A Dividend Of ¥27.00

Carta Holdings, Inc.'s (TSE:3688) investors are due to receive a payment of ¥27.00 per share on 9th of September. This makes the dividend yield 3.3%, which will augment investor returns quite nicely.

View our latest analysis for Carta Holdings

Carta Holdings Might Find It Hard To Continue The Dividend

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Carta Holdings is unprofitable despite paying a dividend, and it is paying out 102% of its free cash flow. These payout levels would generally be quite difficult to keep up.

Over the next year, EPS might fall by 32.5% based on recent performance. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Carta Holdings Doesn't Have A Long Payment History

Carta Holdings' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 5 years was ¥16.00 in 2019, and the most recent fiscal year payment was ¥54.00. This implies that the company grew its distributions at a yearly rate of about 28% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Carta Holdings' earnings per share has shrunk at 32% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

We're Not Big Fans Of Carta Holdings' Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Carta Holdings make more consistent payments in the future. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Carta Holdings that investors should take into consideration. 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.