Yamashin-Filter (TSE:6240) Has Announced That It Will Be Increasing Its Dividend To ¥5.00

Yamashin-Filter Corp. (TSE:6240) will increase its dividend from last year's comparable payment on the 2nd of December to ¥5.00. The payment will take the dividend yield to 2.4%, which is in line with the average for the industry.

See our latest analysis for Yamashin-Filter

Yamashin-Filter's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite easily covered by Yamashin-Filter's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 22.0%. If the dividend continues on this path, the payout ratio could be 67% by next year, which we think can be pretty sustainable going forward.

Yamashin-Filter's Dividend Has Lacked Consistency

It's comforting to see that Yamashin-Filter has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of ¥2.00 in 2015 to the most recent total annual payment of ¥10.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. 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.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Yamashin-Filter's EPS has declined at around 11% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Yamashin-Filter's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Yamashin-Filter has 2 warning signs (and 1 which is potentially serious) we think you should know about. 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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