SENKO Group Holdings (TSE:9069) Is Paying Out A Larger Dividend Than Last Year

SENKO Group Holdings Co., Ltd. (TSE:9069) will increase its dividend from last year's comparable payment on the 3rd of December to ¥25.00. Based on this payment, the dividend yield for the company will be 2.4%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that SENKO Group Holdings' stock price has increased by 38% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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SENKO Group Holdings' Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, SENKO Group Holdings was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 8.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 44%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for SENKO Group Holdings

SENKO Group Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥16.00 total annually to ¥50.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

SENKO Group Holdings Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that SENKO Group Holdings has been growing its earnings per share at 6.5% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for SENKO Group Holdings' prospects of growing its dividend payments in the future.

An additional note is that the company has been raising capital by issuing stock equal to 14% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On SENKO Group Holdings' Dividend

In summary, while it's always good to see the dividend being raised, we don't think SENKO Group Holdings' payments are rock solid. While SENKO Group Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, SENKO Group Holdings has 2 warning signs (and 1 which is concerning) we think 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.