RACCOON HOLDINGS' (TSE:3031) Upcoming Dividend Will Be Larger Than Last Year's

RACCOON HOLDINGS, Inc. (TSE:3031) will increase its dividend from last year's comparable payment on the 9th of January to ¥10.00. This will take the annual payment to 3.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for RACCOON HOLDINGS

RACCOON HOLDINGS Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, RACCOON HOLDINGS' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 101% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Earnings per share is forecast to rise by 26.7% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 96% over the next year.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥1.42 total annually to ¥20.00. This works out to be a compound annual growth rate (CAGR) of approximately 30% a year over that time. RACCOON HOLDINGS has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Come By

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. RACCOON HOLDINGS has seen earnings per share falling at 6.3% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

RACCOON HOLDINGS' Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, RACCOON HOLDINGS has 3 warning signs (and 1 which is a bit concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.