Yahagi ConstructionLtd (TSE:1870) Has Announced That It Will Be Increasing Its Dividend To ¥45.00

Yahagi Construction Co.,Ltd. (TSE:1870) will increase its dividend from last year's comparable payment on the 1st of December to ¥45.00. This will take the annual payment to 4.1% of the stock price, which is above what most companies in the industry pay.

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Yahagi ConstructionLtd's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Yahagi ConstructionLtd is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 6.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

See our latest analysis for Yahagi ConstructionLtd

Yahagi ConstructionLtd Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥18.00 in 2015, and the most recent fiscal year payment was ¥90.00. This means that it has been growing its distributions at 17% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, Yahagi ConstructionLtd has only grown its earnings per share at 4.5% per annum over the past five years. While growth may be thin on the ground, Yahagi ConstructionLtd could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Yahagi ConstructionLtd will make a great income stock. While Yahagi ConstructionLtd is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. As an example, we've identified 1 warning sign for Yahagi ConstructionLtd that you should be aware of before investing. Is Yahagi ConstructionLtd 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.