Simplex Holdings (TSE:4373) Is Paying Out A Larger Dividend Than Last Year

Simplex Holdings, Inc. (TSE:4373) will increase its dividend from last year's comparable payment on the 3rd of June to ¥50.00. This will take the annual payment to 1.9% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Simplex Holdings

Simplex Holdings' Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Simplex Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 21.1% over the next year. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Simplex Holdings Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2022, the dividend has gone from ¥23.00 total annually to ¥50.00. This means that it has been growing its distributions at 30% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Simplex Holdings has seen EPS rising for the last five years, at 49% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Simplex Holdings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Simplex Holdings is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Simplex Holdings that investors need to be conscious of moving forward. 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.