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 4.2%, which shareholders will be pleased with.
Check out our latest analysis for JTEKT
JTEKT's Future Dividend Projections Appear Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, JTEKT's dividend was only 66% of earnings, however it was paying out 464% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Over the next year, EPS is forecast to expand by 32.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.
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. Since 2015, the dividend has gone from ¥20.00 total annually to ¥50.00. This means that it has been growing its distributions at 9.6% per annum over that time. 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. JTEKT has impressed us by growing EPS at 18% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.
In Summary
Overall, we always like to see the dividend being raised, but we don't think JTEKT will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 3 warning signs for JTEKT 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.
About TSE:6473
JTEKT
Manufactures and sells steering systems, driveline components, bearings, machine tools, electronic control devices, home accessory equipment, etc.
Flawless balance sheet average dividend payer.
