The board of Yurtec Corporation (TSE:1934) has announced that it will pay a dividend on the 2nd of December, with investors receiving ¥23.00 per share. Based on this payment, the dividend yield for the company will be 2.8%, which is fairly typical for the industry.
View our latest analysis for Yurtec
Yurtec's Future Dividend Projections Appear Well Covered By Earnings
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Yurtec was paying a whopping 307% as a dividend, but this only made up 37% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.
If the trend of the last few years continues, EPS will grow by 6.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ¥10.00 total annually to ¥46.00. This means that it has been growing its distributions at 16% per annum over that time. Yurtec has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Has Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Yurtec has seen EPS rising for the last five years, at 6.9% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Our Thoughts On Yurtec's Dividend
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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign 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.
About TSE:1934
Yurtec
Operates as a facility engineering company in Japan and internationally.
Flawless balance sheet with proven track record and pays a dividend.
