Septeni Holdings (TSE:4293) Has Announced That Its Dividend Will Be Reduced To ¥18.00

Septeni Holdings Co., Ltd. (TSE:4293) is reducing its dividend from last year's comparable payment to ¥18.00 on the 9th of March. The dividend yield of 4.4% is still a nice boost to shareholder returns, despite the cut.

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Estimates Indicate Septeni Holdings' Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, Septeni Holdings was paying out 193% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

Over the next year, EPS is forecast to expand by 12.1%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 128% over the next year.

Check out our latest analysis for Septeni Holdings

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥1.80 total annually to ¥18.00. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Septeni Holdings Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Septeni Holdings has been growing its earnings per share at 10% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

Septeni Holdings' Dividend Doesn't Look Sustainable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. This company is not in the top tier of income providing stocks.

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. For example, we've picked out 1 warning sign for Septeni Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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