Yuken Kogyo Co., Ltd. (TSE:6393) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of June to ¥130.00. This will take the annual payment to 5.1% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Yuken Kogyo
Yuken Kogyo's Future Dividend Projections Appear Well Covered By Earnings
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Yuken Kogyo was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS could expand by 4.3% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.
Yuken Kogyo Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ¥60.00 in 2015, and the most recent fiscal year payment was ¥130.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend's Growth Prospects Are Limited
Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 4.3% a year for the past five years, which isn't massive but still better than seeing them shrink. Yuken Kogyo is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
We Really Like Yuken Kogyo's Dividend
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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Yuken Kogyo that investors should take into consideration. Is Yuken Kogyo 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.
About TSE:6393
Yuken Kogyo
Develops, manufactures, and sells hydraulic equipment and systems, and environmental machinery in Japan and internationally.
Flawless balance sheet 6 star dividend payer.