WILLPLUS Holdings' (TSE:3538) Shareholders Will Receive A Bigger Dividend Than Last Year

WILLPLUS Holdings Corporation (TSE:3538) will increase its dividend from last year's comparable payment on the 13th of September to ¥27.51. This makes the dividend yield 4.4%, which is above the industry average.

View our latest analysis for WILLPLUS Holdings

WILLPLUS Holdings' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, WILLPLUS Holdings was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 69.4%. If the dividend continues on this path, the payout ratio could be 27% by next year, which we think can be pretty sustainable going forward.

WILLPLUS Holdings' Dividend Has Lacked Consistency

It's comforting to see that WILLPLUS Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of ¥7.00 in 2016 to the most recent total annual payment of ¥43.51. This means that it has been growing its distributions at 26% per annum over that time. 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.

The Dividend Has Growth Potential

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. We are encouraged to see that WILLPLUS Holdings has grown earnings per share at 7.3% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On WILLPLUS Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think WILLPLUS Holdings' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think WILLPLUS 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for WILLPLUS Holdings that investors need to be conscious of moving forward. Is WILLPLUS 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.