YASKAWA Electric (TSE:6506) Will Pay A Dividend Of ¥34.00

YASKAWA Electric Corporation's (TSE:6506) investors are due to receive a payment of ¥34.00 per share on 8th of May. Despite this raise, the dividend yield of 1.4% is only a modest boost to shareholder returns.

See our latest analysis for YASKAWA Electric

YASKAWA Electric's Projected Earnings Seem Likely To Cover Future 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 earning enough to make the dividend feasible, but the cash payout ratio of 77% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

The next year is set to see EPS grow by 8.7%. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

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 2014, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥68.00. This means that it has been growing its distributions at 19% per annum over that time. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. 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.

Our Thoughts On YASKAWA Electric's Dividend

Overall, we always like to see the dividend being raised, but we don't think YASKAWA Electric will make a great income stock. While YASKAWA Electric is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think YASKAWA Electric is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 17 analysts we track are forecasting for YASKAWA Electric for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.