Meiho Enterprise's (TSE:8927) Dividend Will Be ¥6.50

Meiho Enterprise Co., Ltd. (TSE:8927) will pay a dividend of ¥6.50 on the 27th of October. This means that the annual payment will be 2.9% of the current stock price, which is in line with the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Meiho Enterprise's stock price has increased by 59% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Meiho Enterprise's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Meiho Enterprise 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 19.0% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Meiho Enterprise

Meiho Enterprise Is Still Building Its Track Record

It is great to see that Meiho Enterprise 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. Since 2017, the dividend has gone from ¥5.00 total annually to ¥12.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Meiho Enterprise has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Meiho Enterprise has seen EPS rising for the last five years, at 19% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Meiho Enterprise's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Meiho Enterprise is earning enough to cover the payments, the cash flows are lacking. We don't think Meiho Enterprise is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 5 warning signs for Meiho Enterprise you should be aware of, and 1 of them makes us a bit uncomfortable. Is Meiho Enterprise 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.