DIGITAL HEARTS HOLDINGS (TSE:3676) Is Due To Pay A Dividend Of ¥10.50

DIGITAL HEARTS HOLDINGS Co., Ltd. (TSE:3676) has announced that it will pay a dividend of ¥10.50 per share on the 5th of December. This makes the dividend yield 2.1%, which will augment investor returns quite nicely.

Check out our latest analysis for DIGITAL HEARTS HOLDINGS

DIGITAL HEARTS HOLDINGS Is Paying Out More Than It Is Earning

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. DIGITAL HEARTS HOLDINGS is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Earnings per share is forecast to rise by 50.5% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 195%, which is a bit high and could start applying pressure to the balance sheet.

DIGITAL HEARTS HOLDINGS Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥7.50 in 2014 to the most recent total annual payment of ¥21.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. DIGITAL HEARTS HOLDINGS' earnings per share has shrunk at 36% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. 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 has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 4 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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