Square Enix Holdings' (TSE:9684) Upcoming Dividend Will Be Larger Than Last Year's

Square Enix Holdings Co., Ltd.'s (TSE:9684) dividend will be increasing from last year's payment of the same period to ¥43.00 on 3rd of June. Although the dividend is now higher, the yield is only 1.1%, which is below the industry average.

View our latest analysis for Square Enix Holdings

Square Enix Holdings' Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Square Enix Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 20.9%. If the dividend continues along recent trends, we estimate the payout ratio could reach 78%, which is on the higher side, but certainly still feasible.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥30.00 total annually to ¥71.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.0% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Square Enix Holdings might have put its house in order since then, but we remain cautious.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Square Enix Holdings' EPS has declined at around 14% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Square Enix Holdings' Dividend

Overall, we always like to see the dividend being raised, but we don't think Square Enix Holdings will make a great income stock. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Square Enix Holdings that investors should take into consideration. Is Square Enix 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.