Needs Well (TSE:3992) Is Increasing Its Dividend To ¥12.00

Needs Well Inc. (TSE:3992) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of December to ¥12.00. This makes the dividend yield 2.1%, which is above the industry average.

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Needs Well's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Needs Well was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 0.8% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 59%, which is definitely feasible to continue.

See our latest analysis for Needs Well

Needs Well Doesn't Have A Long Payment History

It is great to see that Needs Well has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2020, the dividend has gone from ¥4.25 total annually to ¥12.00. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Needs Well 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's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Needs Well hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Needs Well's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Needs Well is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Needs Well that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.