Innovation HoldingsLTD (TSE:3484) Is Increasing Its Dividend To ¥21.00

The board of Innovation Holdings CO.,LTD. (TSE:3484) has announced that it will be paying its dividend of ¥21.00 on the 18th of June, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 2.2%.

View our latest analysis for Innovation HoldingsLTD

Innovation HoldingsLTD's Future Dividend Projections Appear Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Innovation HoldingsLTD was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Looking forward, earnings per share is forecast to rise by 26.2% over the next year. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

Innovation HoldingsLTD Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2022, the dividend has gone from ¥12.00 total annually to ¥21.00. This implies that the company grew its distributions at a yearly rate of about 32% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. It's not great to see that Innovation HoldingsLTD's earnings per share has fallen at approximately 4.8% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Innovation HoldingsLTD's Dividend

Overall, we always like to see the dividend being raised, but we don't think Innovation HoldingsLTD will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Innovation HoldingsLTD has been making. 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. 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 Innovation HoldingsLTD that investors should take into consideration. Is Innovation HoldingsLTD 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.