Seino Holdings' (TSE:9076) Dividend Will Be ¥43.00

Seino Holdings Co., Ltd.'s (TSE:9076) investors are due to receive a payment of ¥43.00 per share on 5th of December. This means the annual payment is 4.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Seino Holdings

Seino Holdings Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 103% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 67%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS is forecast to expand by 18.5%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 109%, which probably can't continue without putting some pressure on the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥11.00 in 2014 to the most recent total annual payment of ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Seino Holdings has seen earnings per share falling at 3.7% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

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. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Seino Holdings that investors should take into consideration. Is Seino Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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