Yamashin-Filter (TSE:6240) Is Increasing Its Dividend To ¥10.00

Yamashin-Filter Corp. (TSE:6240) will increase its dividend from last year's comparable payment on the 26th of June to ¥10.00. This makes the dividend yield 3.3%, which is above the industry average.

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Yamashin-Filter's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Yamashin-Filter's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

The next year is set to see EPS grow by 20.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 67%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Yamashin-Filter

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥2.00 total annually to ¥20.00. This means that it has been growing its distributions at 26% per annum over that time. 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Yamashin-Filter has seen EPS rising for the last five years, at 45% per annum. Yamashin-Filter is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Yamashin-Filter's Dividend

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 hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Yamashin-Filter that investors need to be conscious of moving forward. 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.