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

The board of Yamashin-Filter Corp. (TSE:6240) has announced that it will be paying its dividend of ¥5.00 on the 2nd of December, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.2%, which is fairly typical for the industry.

Check out our latest analysis for Yamashin-Filter

Yamashin-Filter'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, Yamashin-Filter's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 13.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ¥2.00 in 2015 to the most recent total annual payment of ¥10.00. This means that it has been growing its distributions at 20% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Yamashin-Filter's EPS was effectively flat over the past five years, which could stop the company from paying more every year. While growth may be thin on the ground, Yamashin-Filter could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Yamashin-Filter's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Yamashin-Filter (1 is a bit unpleasant!) that you should be aware of before investing. Is Yamashin-Filter 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.