JBCC Holdings (TSE:9889) Has Announced A Dividend Of ¥17.00

The board of JBCC Holdings Inc. (TSE:9889) has announced that it will pay a dividend on the 2nd of December, with investors receiving ¥17.00 per share. This makes the dividend yield 2.5%, which will augment investor returns quite nicely.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

JBCC Holdings' Projections Indicate Future Payments May Be Unsustainable

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%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 144% over the next year.

View our latest analysis for JBCC Holdings

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from ¥6.25 total annually to ¥35.00. This means that it has been growing its distributions at 19% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that JBCC Holdings has been growing its earnings per share at 21% a 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, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think JBCC Holdings is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for JBCC Holdings that investors need to be conscious of moving forward. 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.