JBCC Holdings (TSE:9889) Has Affirmed Its Dividend Of ¥17.00

JBCC Holdings Inc.'s (TSE:9889) investors are due to receive a payment of ¥17.00 per share on 2nd of December. This makes the dividend yield 2.5%, which will augment investor returns quite nicely.

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Estimates Indicate JBCC Holdings' Could Struggle to Maintain Dividend Payments In The Future

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 175% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 34%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Over the next year, EPS is forecast to expand by 12.5%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 144%, which probably can't continue without putting some pressure on the balance sheet.

Check out our latest analysis for JBCC Holdings

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥6.25, compared to the most recent full-year payment of ¥35.00. This means that it has been growing its distributions at 19% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

JBCC Holdings' Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. JBCC Holdings has impressed us by growing EPS at 21% per year over the past five years. Although earnings per share is up nicely JBCC Holdings is paying out 175% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Our Thoughts On JBCC Holdings' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for JBCC Holdings that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.