IKKA Holdings (Cayman)'s (TWSE:2250) Upcoming Dividend Will Be Larger Than Last Year's

IKKA Holdings (Cayman) Limited's (TWSE:2250) dividend will be increasing from last year's payment of the same period to NT$3.19 on 8th of October. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.

Check out our latest analysis for IKKA Holdings (Cayman)

IKKA Holdings (Cayman)'s Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, IKKA Holdings (Cayman)'s dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share could rise by 1.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.

IKKA Holdings (Cayman) Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The annual payment during the last 2 years was NT$3.22 in 2022, and the most recent fiscal year payment was NT$3.20. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, IKKA Holdings (Cayman)'s EPS was effectively flat over the past five years, which could stop the company from paying more every year. IKKA Holdings (Cayman) is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for IKKA Holdings (Cayman) that investors should take into consideration. Is IKKA Holdings (Cayman) 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.