Bunka Shutter (TSE:5930) Has Announced A Dividend Of ¥21.00

The board of Bunka Shutter Co., Ltd. (TSE:5930) has announced that it will pay a dividend on the 21st of June, with investors receiving ¥21.00 per share. This makes the dividend yield 2.7%, which will augment investor returns quite nicely.

See our latest analysis for Bunka Shutter

Bunka Shutter's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Bunka Shutter was paying a whopping 96% as a dividend, but this only made up 29% 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 9.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥12.00 in 2014, and the most recent fiscal year payment was ¥42.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Bunka Shutter 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.

Bunka Shutter Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Bunka Shutter has seen EPS rising for the last five years, at 9.3% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Bunka Shutter's prospects of growing its dividend payments in the future.

We should note that Bunka Shutter has issued stock equal to 15% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Bunka Shutter's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Bunka Shutter that you should be aware of before investing. 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.