Okabe (TSE:5959) Will Pay A Dividend Of ¥20.00

The board of Okabe Co., Ltd. (TSE:5959) has announced that it will pay a dividend of ¥20.00 per share on the 3rd of September. This will take the dividend yield to an attractive 4.9%, providing a nice boost to shareholder returns.

Our free stock report includes 2 warning signs investors should be aware of before investing in Okabe. Read for free now.

Okabe's Distributions May Be Difficult To Sustain

A big dividend yield for a few years doesn't mean much if it can't be sustained. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. These payout levels would generally be quite difficult to keep up.

Recent, EPS has fallen by 45.2%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

See our latest analysis for Okabe

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ¥22.00, compared to the most recent full-year payment of ¥42.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Okabe might have put its house in order since then, but we remain cautious.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 45% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

We're Not Big Fans Of Okabe's Dividend

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

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 instance, we've picked out 2 warning signs for Okabe that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.