Chuo WarehouseLtd's (TSE:9319) Upcoming Dividend Will Be Larger Than Last Year's

Chuo Warehouse Co.,Ltd. (TSE:9319) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of June to ¥22.00. This takes the annual payment to 2.9% of the current stock price, which is about average for the industry.

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Chuo WarehouseLtd's Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Chuo WarehouseLtd's dividend was only 37% of earnings, however it was paying out 107% of free 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.

If the trend of the last few years continues, EPS will grow by 9.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

View our latest analysis for Chuo WarehouseLtd

Chuo WarehouseLtd 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. The dividend has gone from an annual total of ¥22.50 in 2015 to the most recent total annual payment of ¥38.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.4% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Chuo WarehouseLtd Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Chuo WarehouseLtd has impressed us by growing EPS at 9.7% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Chuo WarehouseLtd's prospects of growing its dividend payments in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Chuo WarehouseLtd will make a great income stock. 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.

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. As an example, we've identified 1 warning sign for Chuo WarehouseLtd that you should be aware of before investing. Is Chuo WarehouseLtd not quite the opportunity you were looking for? Why not check out our selection of top 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.