JGC Holdings (TSE:1963) Will Pay A Dividend Of ¥40.00

JGC Holdings Corporation (TSE:1963) will pay a dividend of ¥40.00 on the 30th of June. This payment means the dividend yield will be 2.0%, which is below the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that JGC Holdings' stock price has increased by 39% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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JGC Holdings' Distributions May Be Difficult To Sustain

If it is predictable over a long period, even low dividend yields can be attractive. Even though JGC Holdings is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share is forecast to rise by 28.6% over the next year. This is the right direction to be moving, but it is not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

View our latest analysis for JGC Holdings

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. There hasn't been much of a change in the dividend over the last 10 years. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Company Could Face Some Challenges Growing The Dividend

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. JGC Holdings has impressed us by growing EPS at 11% per year over the past five years. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

JGC Holdings' Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means JGC Holdings has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. 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. To that end, JGC Holdings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.