Yamaha Motor (TSE:7272) Is Due To Pay A Dividend Of ¥25.00

Yamaha Motor Co., Ltd. (TSE:7272) has announced that it will pay a dividend of ¥25.00 per share on the 8th of September. This means the annual payment is 4.4% of the current stock price, which is above the average for the industry.

We've discovered 3 warning signs about Yamaha Motor. View them for free.

Yamaha Motor's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Yamaha Motor was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 80% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share is forecast to rise by 9.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Yamaha Motor

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 ¥9.67 in 2015 to the most recent total annual payment of ¥50.00. This means that it has been growing its distributions at 18% per annum 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.

We Could See Yamaha Motor's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Yamaha Motor has been growing its earnings per share at 9.0% a year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On Yamaha Motor's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yamaha Motor's payments, as there could be some issues with sustaining them into the future. While Yamaha Motor is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

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. For example, we've identified 3 warning signs for Yamaha Motor (1 can't be ignored!) that you should be aware of before investing. Is Yamaha Motor 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.