YASKAWA Electric (TSE:6506) Is Increasing Its Dividend To ¥34.00

YASKAWA Electric Corporation's (TSE:6506) dividend will be increasing from last year's payment of the same period to ¥34.00 on 5th of November. Although the dividend is now higher, the yield is only 1.5%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. YASKAWA Electric's stock price has reduced by 31% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

See our latest analysis for YASKAWA Electric

YASKAWA Electric's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. But before making this announcement, YASKAWA Electric's earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

The next year is set to see EPS grow by 10.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥12.00 total annually to ¥68.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that YASKAWA Electric has been growing its earnings per share at 10% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think YASKAWA Electric's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments YASKAWA Electric has been making. This company is not in the top tier of income providing stocks.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 18 analysts we track are forecasting for YASKAWA Electric for free with public analyst estimates for the company. Is YASKAWA Electric 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.