The board of Niraku GC Holdings, Inc. (HKG:1245) has announced that it will be paying its dividend of ¥0.008 on the 12th of July, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.3%, which shareholders will be pleased with.
View our latest analysis for Niraku GC Holdings
Niraku GC Holdings' Earnings Easily Cover The Distributions
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Niraku GC Holdings was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
If the trend of the last few years continues, EPS will grow by 1.7% over the next 12 months. If the dividend continues on this path, the payout ratio could be 2.3% by next year, which we think can be pretty sustainable going forward.
Niraku GC Holdings' Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2015, the dividend has gone from ¥0.76 total annually to ¥0.26. Dividend payments have fallen sharply, down 66% over that time. A company that decreases its dividend over time generally isn't what we are looking for.
Niraku GC Holdings May Find It Hard To Grow The Dividend
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Unfortunately, Niraku GC Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.
In Summary
Overall, it's great to see the dividend being raised and that it is still 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.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for Niraku GC Holdings that investors should know about before committing capital to this stock. Is Niraku GC Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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