WILLPLUS Holdings (TSE:3538) Will Pay A Dividend Of ¥18.00

The board of WILLPLUS Holdings Corporation (TSE:3538) has announced that it will pay a dividend on the 10th of March, with investors receiving ¥18.00 per share. This will take the annual payment to 4.6% of the stock price, which is above what most companies in the industry pay.

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WILLPLUS Holdings' Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, WILLPLUS Holdings was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 14.5% over the next year. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for WILLPLUS Holdings

WILLPLUS Holdings' Dividend Has Lacked Consistency

WILLPLUS Holdings has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was ¥7.00 in 2016, and the most recent fiscal year payment was ¥46.00. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. WILLPLUS Holdings has seen EPS rising for the last five years, at 13% per annum. WILLPLUS Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. While WILLPLUS Holdings is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for WILLPLUS Holdings (of which 1 shouldn't be ignored!) you should know about. 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.