JTEKT (TSE:6473) Is Due To Pay A Dividend Of ¥25.00

The board of JTEKT Corporation (TSE:6473) has announced that it will pay a dividend of ¥25.00 per share on the 26th of May. This takes the dividend yield to 4.9%, which shareholders will be pleased with.

See our latest analysis for JTEKT

JTEKT's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, JTEKT was paying a whopping 464% as a dividend, but this only made up 29% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 31.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥20.00 in 2014 to the most recent total annual payment of ¥50.00. This means that it has been growing its distributions at 9.6% 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. JTEKT might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that JTEKT has been growing its earnings per share at 18% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On JTEKT's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While JTEKT is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've picked out 3 warning signs for JTEKT that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.