DIGITAL HEARTS HOLDINGS (TSE:3676) Has Announced A Dividend Of ¥10.50

DIGITAL HEARTS HOLDINGS Co., Ltd.'s (TSE:3676) investors are due to receive a payment of ¥10.50 per share on 5th of December. Based on this payment, the dividend yield on the company's stock will be 1.9%, which is an attractive boost to shareholder returns.

View our latest analysis for DIGITAL HEARTS HOLDINGS

DIGITAL HEARTS HOLDINGS Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Even though DIGITAL HEARTS HOLDINGS isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

Over the next year, EPS is forecast to expand by 50.5%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 195%, which probably can't continue without putting some pressure on the balance sheet.

DIGITAL HEARTS HOLDINGS Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥7.50, compared to the most recent full-year payment of ¥21.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. DIGITAL HEARTS HOLDINGS' earnings per share has shrunk at 36% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about DIGITAL HEARTS HOLDINGS' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for DIGITAL HEARTS HOLDINGS that you should be aware of before investing. Is DIGITAL HEARTS 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.

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