WILLPLUS Holdings' (TSE:3538) Upcoming Dividend Will Be Larger Than Last Year's

The board of WILLPLUS Holdings Corporation (TSE:3538) has announced that it will be paying its dividend of ¥27.51 on the 13th of September, an increased payment from last year's comparable dividend. This makes the dividend yield 4.4%, which is above the industry average.

See our latest analysis for WILLPLUS Holdings

WILLPLUS Holdings' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. WILLPLUS Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 69.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was ¥7.00 in 2016, and the most recent fiscal year payment was ¥43.51. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See WILLPLUS Holdings' Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. WILLPLUS Holdings has impressed us by growing EPS 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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think WILLPLUS Holdings will make a great income stock. While WILLPLUS Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for WILLPLUS Holdings that investors should know about before committing capital to this stock. 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.