Geo Holdings (TSE:2681) Is Due To Pay A Dividend Of ¥17.00

The board of Geo Holdings Corporation (TSE:2681) has announced that it will pay a dividend on the 10th of December, with investors receiving ¥17.00 per share. This means the annual payment is 2.0% of the current stock price, which is above the average for the industry.

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Geo Holdings' Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Geo Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 28.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

See our latest analysis for Geo Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥32.00 in 2015, and the most recent fiscal year payment was ¥34.00. Its dividends have grown at less than 1% per annum over this time frame. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Geo Holdings has seen earnings per share falling at 4.9% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Geo Holdings (of which 1 is significant!) you should know about. Is Geo 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.