CAC Holdings (TSE:4725) Is Due To Pay A Dividend Of ¥40.00

The board of CAC Holdings Corporation (TSE:4725) has announced that it will pay a dividend on the 28th of March, with investors receiving ¥40.00 per share. The dividend yield will be 4.4% based on this payment which is still above the industry average.

View our latest analysis for CAC Holdings

CAC Holdings' Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 79% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS could expand by 13.3% if recent trends continue. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 52% which would be quite comfortable going to take the dividend forward.

CAC Holdings Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥32.00 in 2014, and the most recent fiscal year payment was ¥80.00. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

CAC Holdings' Dividend Might Lack Growth

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. CAC Holdings has seen EPS rising for the last five years, at 13% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On CAC Holdings' Dividend

Overall, we think CAC Holdings is a solid choice as a dividend stock, even though the dividend wasn't raised this year. With a reasonable track record and good earnings coverage, the payments look sustainable. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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 CAC Holdings that investors should know about before committing capital to this stock. Is CAC 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.