Yurtec Corporation's (TSE:1934) investors are due to receive a payment of ¥23.00 per share on 2nd of December. Based on this payment, the dividend yield for the company will be 3.1%, which is fairly typical for the industry.
View our latest analysis for Yurtec
Yurtec's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Yurtec was paying a whopping 307% as a dividend, but this only made up 28% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.
Looking forward, earnings per share could rise by 2.5% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 52% by next year, which is in a pretty sustainable range.
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 2014, the dividend has gone from ¥10.00 total annually to ¥46.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Yurtec has only grown its earnings per share at 2.5% per annum over the past five years. While growth may be thin on the ground, Yurtec 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 Yurtec will make a great income stock. While Yurtec is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Yurtec that investors should know about before committing capital to this stock. Is Yurtec 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.
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About TSE:1934
Yurtec
Operates as a facility engineering company in Japan and internationally.
Flawless balance sheet with proven track record.
