Yokohama Rubber Company (TSE:5101) Has Announced That It Will Be Increasing Its Dividend To ¥64.00

The Yokohama Rubber Company, Limited (TSE:5101) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of March to ¥64.00. Despite this raise, the dividend yield of 1.9% is only a modest boost to shareholder returns.

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 Yokohama Rubber Company's stock price has increased by 73% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Yokohama Rubber Company's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Yokohama Rubber Company was paying a whopping 236% as a dividend, but this only made up 25% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 16.0% over the next year. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Yokohama Rubber Company

Yokohama Rubber Company Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥52.00 total annually to ¥112.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Yokohama Rubber Company has impressed us by growing EPS at 20% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Yokohama Rubber Company's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Yokohama Rubber Company's payments are rock solid. While Yokohama Rubber Company is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Yokohama Rubber Company (of which 1 makes us a bit uncomfortable!) 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.