Densan System Holdings (TSE:4072) Will Pay A Larger Dividend Than Last Year At ¥40.00

Densan System Holdings Co., Ltd. (TSE:4072) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of March to ¥40.00. This makes the dividend yield about the same as the industry average at 1.6%.

View our latest analysis for Densan System Holdings

Densan System Holdings' Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, Densan System Holdings' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 16.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, 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 an extended history of paying stable dividends. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥40.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Densan System Holdings Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Densan System Holdings has seen EPS rising for the last five years, at 7.7% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Densan System Holdings' Dividend

Overall, a dividend increase is always good, and we think that Densan System Holdings is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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 Densan System Holdings that investors should know about before committing capital to this stock. 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.