Chikaranomoto Holdings (TSE:3561) Will Pay A Dividend Of ¥10.00

Chikaranomoto Holdings Co., Ltd. (TSE:3561) will pay a dividend of ¥10.00 on the 9th of June. This will take the annual payment to 1.4% of the stock price, which is above what most companies in the industry pay.

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Chikaranomoto Holdings' Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Chikaranomoto Holdings was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 3.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Chikaranomoto Holdings

Chikaranomoto Holdings' Dividend Has Lacked Consistency

It's comforting to see that Chikaranomoto Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the annual payment back then was ¥4.00, compared to the most recent full-year payment of ¥20.00. This means that it has been growing its distributions at 20% per annum over that time. Chikaranomoto Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Chikaranomoto Holdings has seen EPS rising for the last five years, at 54% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Chikaranomoto Holdings Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Chikaranomoto Holdings is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. See if management have their own wealth at stake, by checking insider shareholdings in Chikaranomoto Holdings stock. Is Chikaranomoto Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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