Mr Max Holdings (TSE:8203) Will Pay A Larger Dividend Than Last Year At ¥20.00

Mr Max Holdings Ltd. (TSE:8203) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of May to ¥20.00. This will take the dividend yield to an attractive 3.0%, providing a nice boost to shareholder returns.

See our latest analysis for Mr Max Holdings

Mr Max Holdings' Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Mr Max Holdings was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 10.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Mr Max Holdings' Dividend Has Lacked Consistency

It's comforting to see that Mr Max 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. Since 2017, the annual payment back then was ¥14.00, compared to the most recent full-year payment of ¥20.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Mr Max Holdings has grown earnings per share at 11% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Mr Max Holdings' prospects of growing its dividend payments in the future.

Mr Max Holdings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Mr Max Holdings is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Mr Max Holdings that investors should take into consideration. Is Mr Max Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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