Okumura (TSE:1833) Is Due To Pay A Dividend Of ¥110.00

The board of Okumura Corporation (TSE:1833) has announced that it will pay a dividend of ¥110.00 per share on the 10th of December. However, the dividend yield of 4.5% is still a decent boost to shareholder returns.

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Okumura's Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the dividend made up 153% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Looking forward, EPS could fall by 10.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 181%, which could put the dividend under pressure if earnings don't start to improve.

Check out our latest analysis for Okumura

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 ¥60.00 total annually to ¥220.00. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 10% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

We're Not Big Fans Of Okumura's Dividend

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Okumura has 4 warning signs (and 2 which are a bit unpleasant) we think 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.