Is It Worth Considering Honeys Holdings Co., Ltd. (TSE:2792) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Honeys Holdings Co., Ltd. (TSE:2792) is about to trade ex-dividend in the next 4 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Honeys Holdings investors that purchase the stock on or after the 29th of May will not receive the dividend, which will be paid on the 21st of August.

The company's next dividend payment will be JP¥30.00 per share. Last year, in total, the company distributed JP¥55.00 to shareholders. Based on the last year's worth of payments, Honeys Holdings stock has a trailing yield of around 3.5% on the current share price of JP¥1570.00. If you buy this business for its dividend, you should have an idea of whether Honeys Holdings's dividend is reliable and sustainable. So we need to investigate whether Honeys Holdings can afford its dividend, and if the dividend could grow.

Our free stock report includes 1 warning sign investors should be aware of before investing in Honeys Holdings. Read for free now.

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Honeys Holdings paying out a modest 38% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 67% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Honeys Holdings's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for Honeys Holdings

Click here to see how much of its profit Honeys Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Honeys Holdings, with earnings per share up 5.1% on average over the last five years. Decent historical earnings per share growth suggests Honeys Holdings has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Honeys Holdings has lifted its dividend by approximately 11% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Honeys Holdings worth buying for its dividend? Earnings per share growth has been modest, and it's interesting that Honeys Holdings is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. Overall, it's hard to get excited about Honeys Holdings from a dividend perspective.

On that note, you'll want to research what risks Honeys Holdings is facing. Our analysis shows 1 warning sign for Honeys Holdings and you should be aware of this before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.