SENKO Group Holdings' (TSE:9069) Upcoming Dividend Will Be Larger Than Last Year's

SENKO Group Holdings Co., Ltd.'s (TSE:9069) dividend will be increasing from last year's payment of the same period to ¥21.00 on 4th of December. This will take the dividend yield to an attractive 3.5%, providing a nice boost to shareholder returns.

View our latest analysis for SENKO Group Holdings

SENKO Group Holdings' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, SENKO Group Holdings was paying only paying out a fraction of earnings, but the payment was a massive 623% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS is forecast to expand by 10.4%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

SENKO Group Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥16.00 in 2014, and the most recent fiscal year payment was ¥42.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

We Could See SENKO Group Holdings' Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. SENKO Group Holdings has impressed us by growing EPS at 7.2% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On SENKO Group Holdings' Dividend

Overall, we always like to see the dividend being raised, but we don't think SENKO Group Holdings will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, SENKO Group Holdings has 2 warning signs (and 1 which can't be ignored) we think you should know about. 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.