Startia HoldingsInc (TSE:3393) Will Pay A Larger Dividend Than Last Year At ¥56.00

Startia Holdings,Inc. (TSE:3393) will increase its dividend from last year's comparable payment on the 24th of June to ¥56.00. This makes the dividend yield 4.5%, which is above the industry average.

View our latest analysis for Startia HoldingsInc

Startia HoldingsInc's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Startia HoldingsInc was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share could rise by 51.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 41% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥4.28, compared to the most recent full-year payment of ¥102.00. This implies that the company grew its distributions at a yearly rate of about 37% over that duration. Startia HoldingsInc has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Startia HoldingsInc has impressed us by growing EPS at 51% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Startia HoldingsInc will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Startia HoldingsInc has been making. We don't think Startia HoldingsInc is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Startia HoldingsInc that investors should know about before committing capital to this stock. Is Startia HoldingsInc 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.