The board of Heiwado Co.,Ltd. (TSE:8276) has announced that it will be paying its dividend of ¥30.00 on the 1st of November, an increased payment from last year’s comparable dividend. This will take the dividend yield to an attractive 2.5%, providing a nice boost to shareholder returns.
See our latest analysis for HeiwadoLtd
HeiwadoLtd’s Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, based ont he last payment, HeiwadoLtd was earning enough to cover the dividend pretty comfortably. The business is earning enough to make the dividend feasible, but the cash payout ratio of 90% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.
Looking forward, earnings per share is forecast to rise by 9.2% over the next year. 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.
HeiwadoLtd Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥27.00 total annually to ¥60.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% 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.
The Dividend’s Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. However, things aren’t all that rosy. HeiwadoLtd hasn’t seen much change in its earnings per share over the last five years.
Our Thoughts On HeiwadoLtd’s Dividend
Overall, we always like to see the dividend being raised, but we don’t think HeiwadoLtd will make a great income stock. While HeiwadoLtd is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don’t think HeiwadoLtd is a great stock to add to your portfolio if income is your focus.
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 instance, we’ve picked out 1 warning sign for HeiwadoLtd that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Valuation is complex, but we’re helping make it simple.
Find out whether HeiwadoLtd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
Valuation is complex, but we’re helping make it simple.
Find out whether HeiwadoLtd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com