Yokohama Rubber Company's (TSE:5101) Shareholders Will Receive A Bigger Dividend Than Last Year

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. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

See our latest analysis for Yokohama Rubber Company

Yokohama Rubber Company's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, Yokohama Rubber Company's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 1.8% over the next year. 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

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ¥44.00 total annually to ¥98.00. This means that it has been growing its distributions at 8.3% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Yokohama Rubber Company might have put its house in order since then, but we remain cautious.

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 20% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Yokohama Rubber Company Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Yokohama Rubber Company that you should be aware of before investing. 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.