Orchestra Holdings' (TSE:6533) Shareholders Will Receive A Bigger Dividend Than Last Year

Orchestra Holdings Inc. (TSE:6533) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of March to ¥12.00. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.

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Orchestra Holdings' Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Orchestra Holdings was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, could fall by 12.9% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 87%, meaning that most of the company's earnings is being paid out to shareholders.

See our latest analysis for Orchestra Holdings

Orchestra Holdings Doesn't Have A Long Payment History

It is great to see that Orchestra Holdings has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of ¥4.00 in 2018 to the most recent total annual payment of ¥12.00. This implies that the company grew its distributions at a yearly rate of about 17% 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.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Earnings per share has been sinking by 13% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Orchestra Holdings' payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Orchestra Holdings you should be aware of, and 1 of them can't be ignored. Is Orchestra Holdings not quite the opportunity you were looking for? Why not check out our selection of top 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.