Star Mica Holdings Co., Ltd.'s (TSE:2975) investors are due to receive a payment of ¥10.50 per share on 26th of February. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Star Mica Holdings
Star Mica Holdings' Projected Earnings Seem Likely To Cover Future Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Star Mica Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Looking forward, earnings per share could rise by 12.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 22% by next year, which is in a pretty sustainable range.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥4.00 in 2014 to the most recent total annual payment of ¥21.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Star Mica Holdings has seen EPS rising for the last five years, at 12% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Star Mica Holdings you should be aware of, and 1 of them doesn't sit too well with us. 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:2975
Star Mica Holdings
Acquires, renovates, manages, and sells pre-owned condominiums in Japan.
Mediocre balance sheet second-rate dividend payer.
