World (TSE:3612) Is Increasing Its Dividend To ¥43.00

The board of World Co., Ltd. (TSE:3612) has announced that it will be paying its dividend of ¥43.00 on the 29th of May, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.0%, which shareholders will be pleased with.

Check out our latest analysis for World

World's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, World's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 21.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

World's Dividend Has Lacked Consistency

Looking back, World's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of ¥69.00 in 2019 to the most recent total annual payment of ¥75.00. This means that it has been growing its distributions at 1.4% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. World's EPS has fallen by approximately 13% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On World's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 4 warning signs for World that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.