JTEKT (TSE:6473) Is Increasing Its Dividend To ¥30.00

JTEKT Corporation (TSE:6473) will increase its dividend from last year's comparable payment on the 26th of November to ¥30.00. This makes the dividend yield 4.6%, which is above the industry average.

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JTEKT's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

EPS is set to grow by 41.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 88% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for JTEKT

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 2015 to the most recent total annual payment of ¥60.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

JTEKT Might Find It Hard To Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. JTEKT has impressed us by growing EPS at 37% per year over the past five years. EPS has been growing well, but JTEKT has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

JTEKT's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We don't think JTEKT is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 3 warning signs for JTEKT (of which 1 can't be ignored!) 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.