Yushin Precision Equipment (TSE:6482) Has Affirmed Its Dividend Of ¥10.00

The board of Yushin Precision Equipment Co., Ltd. (TSE:6482) has announced that it will pay a dividend of ¥10.00 per share on the 2nd of December. This means the annual payment is 2.7% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Yushin Precision Equipment

Yushin Precision Equipment's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Yushin Precision Equipment's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to fall by 1.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 42%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥10.00 in 2014 to the most recent total annual payment of ¥20.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Yushin Precision Equipment's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yushin Precision Equipment's payments, as there could be some issues with sustaining them into the future. While Yushin Precision Equipment is earning enough to cover the payments, the cash flows are lacking. We don't think Yushin Precision Equipment is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Yushin Precision Equipment (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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