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

SENKO Group Holdings Co., Ltd. (TSE:9069) has announced that it will be increasing 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 2.5%, which is fairly typical for the industry.

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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. SENKO Group Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 8.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

See our latest analysis for SENKO Group Holdings

SENKO Group 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. 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. SENKO Group Holdings has seen EPS rising for the last five years, at 6.5% per annum. 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.

We should note that SENKO Group Holdings has issued stock equal to 14% of shares outstanding. 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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 identified 2 warning signs for SENKO Group Holdings (1 is a bit concerning!) 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.