Yorozu's (TSE:7294) Dividend Will Be ¥16.00

Yorozu Corporation (TSE:7294) has announced that it will pay a dividend of ¥16.00 per share on the 16th of June. The dividend yield will be in the average range for the industry at 3.0%.

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Yorozu's Distributions May Be Difficult To Sustain

We aren't too impressed by dividend yields unless they can be sustained over time. Even in the absence of profits, Yorozu is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Over the next year, EPS could expand by 32.0% if recent trends continue. The company seems to be going down the right path, but it will probably take a little bit longer than a year to cross over into profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Check out our latest analysis for Yorozu

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥21.00, compared to the most recent full-year payment of ¥31.00. This means that it has been growing its distributions at 4.0% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Company Could Face Some Challenges Growing The Dividend

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 Yorozu has been growing its earnings per share at 32% a year over the past five years. While the company hasn't yet recorded a profit, the growth rates are healthy. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. Strong earnings growth means Yorozu has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Yorozu that investors should take into consideration. 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.