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 takes the dividend yield to 2.8%, which shareholders will be pleased with.

See our latest analysis for RACCOON HOLDINGS

RACCOON HOLDINGS' Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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 27.2% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 88% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥1.42 in 2014 to the most recent total annual payment of ¥20.00. This implies that the company grew its distributions at a yearly rate of about 30% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, RACCOON HOLDINGS' earnings per share has shrunk at approximately 5.8% per annum. 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

In summary, while it's always good to see the dividend being raised, we don't think RACCOON HOLDINGS' payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think RACCOON HOLDINGS 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. As an example, we've identified 2 warning signs for RACCOON HOLDINGS that you should be aware of before investing. 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.