WITZ (TSE:4440) Will Pay A Larger Dividend Than Last Year At ¥15.00

The board of WITZ Corporation (TSE:4440) has announced that it will be paying its dividend of ¥15.00 on the 1st of December, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 1.5%.

We've discovered 3 warning signs about WITZ. View them for free.

WITZ's Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, WITZ's 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 could rise by 10.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for WITZ

WITZ Is Still Building Its Track Record

It is great to see that WITZ 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. The annual payment during the last 5 years was ¥3.00 in 2020, and the most recent fiscal year payment was ¥15.00. This implies that the company grew its distributions at a yearly rate of about 38% over that duration. WITZ 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 Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. WITZ has impressed us by growing EPS at 10% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like WITZ's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. Case in point: We've spotted 3 warning signs for WITZ (of which 1 is potentially serious!) you should know about. 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.