Yuken Kogyo's (TSE:6393) Dividend Will Be Increased To ¥130.00

Yuken Kogyo Co., Ltd. (TSE:6393) will increase its dividend from last year's comparable payment on the 30th of June to ¥130.00. This makes the dividend yield 5.0%, which is above the industry average.

View our latest analysis for Yuken Kogyo

Yuken Kogyo's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Yuken Kogyo's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the trend of the last few years continues, EPS will grow by 4.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

Yuken Kogyo Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥60.00 total annually to ¥130.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. 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. Growth of 4.3% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

We Really Like Yuken Kogyo's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Yuken Kogyo that investors should know about before committing capital to this stock. Is Yuken Kogyo not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.