Yamashin-Filter's (TSE:6240) Dividend Will Be Increased To ¥7.00

Yamashin-Filter Corp. (TSE:6240) will increase its dividend from last year's comparable payment on the 27th of June to ¥7.00. This makes the dividend yield about the same as the industry average at 2.3%.

See our latest analysis for Yamashin-Filter

Yamashin-Filter's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Yamashin-Filter was easily earning enough to cover the dividend. 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 24.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥2.00, compared to the most recent full-year payment of ¥14.00. This means that it has been growing its distributions at 21% 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

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. Yamashin-Filter has impressed us by growing EPS at 17% per year over the past five years. Yamashin-Filter definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Yamashin-Filter Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Yamashin-Filter is a strong income stock thanks to its track record and growing earnings. 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.

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. As an example, we've identified 2 warning signs for Yamashin-Filter 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.