Yokohama Rubber Company (TSE:5101) Will Pay A Larger Dividend Than Last Year At ¥52.00

The Yokohama Rubber Company, Limited's (TSE:5101) dividend will be increasing from last year's payment of the same period to ¥52.00 on 31st of March. This takes the annual payment to 3.1% of the current stock price, which is about average for the industry.

View our latest analysis for Yokohama Rubber Company

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

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Yokohama Rubber Company 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 1.9%. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend 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 ¥98.00. This implies that the company grew its distributions at a yearly rate of about 8.3% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Yokohama Rubber Company has impressed us by growing EPS at 20% per year over the past five years. 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.

We Really Like Yokohama Rubber Company's Dividend

Overall, a dividend increase is always good, and we think that Yokohama Rubber Company is a strong income stock thanks to its track record and growing earnings. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign 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.

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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.