Yokohama Rubber Company (TSE:5101) Will Pay A Dividend Of ¥42.00

The Yokohama Rubber Company, Limited's (TSE:5101) investors are due to receive a payment of ¥42.00 per share on 2nd of September. This takes the annual payment to 2.5% of the current stock price, which is about average for the industry.

View our latest analysis for Yokohama Rubber Company

Yokohama Rubber Company's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Yokohama Rubber Company's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 14.3%. If the dividend continues on this path, the payout ratio could be 17% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥44.00 in 2014, and the most recent fiscal year payment was ¥93.00. This implies that the company grew its distributions at a yearly rate of about 7.8% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Yokohama Rubber Company has been growing its earnings per share at 17% a year over the past five years. Yokohama Rubber Company definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Yokohama Rubber Company Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Yokohama Rubber Company that investors should know about before committing capital to this stock. Is Yokohama Rubber Company not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.