Iwaki's (TSE:6237) Dividend Will Be Increased To ¥35.00

Iwaki Co., Ltd. (TSE:6237) will increase its dividend on the 1st of July to ¥35.00, which is 2.9% higher than last year's payment from the same period of ¥34.00. The payment will take the dividend yield to 2.1%, which is in line with the average for the industry.

See our latest analysis for Iwaki

Iwaki's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Iwaki's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 12.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

Iwaki's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was ¥22.60, compared to the most recent full-year payment of ¥55.00. This means that it has been growing its distributions at 12% per annum over that time. Iwaki 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 Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Iwaki has seen EPS rising for the last five years, at 15% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Iwaki's prospects of growing its dividend payments in the future.

Iwaki Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Iwaki that investors should take into consideration. 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.