Densan System Holdings (TSE:4072) Is Paying Out A Larger Dividend Than Last Year

Densan System Holdings Co., Ltd. (TSE:4072) will increase its dividend from last year's comparable payment on the 11th of September to ¥20.00. This makes the dividend yield about the same as the industry average at 1.6%.

See our latest analysis for Densan System Holdings

Densan System Holdings' Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Densan System Holdings' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 67.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

Densan System Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥20.00 in 2014, and the most recent fiscal year payment was ¥40.00. This means that it has been growing its distributions at 7.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Densan System Holdings has seen EPS rising for the last five years, at 7.7% per annum. Densan System Holdings definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Densan System Holdings' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Densan System Holdings that investors need to be conscious of moving forward. Is Densan System 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.