YE DIGITAL Corporation (TSE:2354) has announced that it will be increasing its dividend from last year's comparable payment on the 6th of November to ¥8.00. This will take the annual payment to 2.0% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for YE DIGITAL
YE DIGITAL's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, YE DIGITAL was paying only paying out a fraction of earnings, but the payment was a massive 99% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
Over the next year, EPS could expand by 32.2% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.
YE DIGITAL Doesn't Have A Long Payment History
YE DIGITAL's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2017, the annual payment back then was ¥6.00, compared to the most recent full-year payment of ¥16.00. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. YE DIGITAL has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. YE DIGITAL has impressed us by growing EPS at 32% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Our Thoughts On YE DIGITAL's Dividend
In summary, while it's always good to see the dividend being raised, we don't think YE DIGITAL's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for YE DIGITAL that investors should take into consideration. Is YE DIGITAL 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.
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About TSE:2354
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