Obara Group's (TSE:6877) Dividend Will Be ¥60.00

The board of Obara Group Incorporated (TSE:6877) has announced that it will pay a dividend of ¥60.00 per share on the 3rd of June. This means the annual payment is 4.3% of the current stock price, which is above the average for the industry.

View our latest analysis for Obara Group

Obara Group's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Obara Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 3.3% if recent trends continue. 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

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 ¥60.00 in 2015 to the most recent total annual payment of ¥150.00. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Obara Group might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 3.3% per annum over the last five years, which admittedly is a bit slow. If Obara Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, we think Obara Group is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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 instance, we've picked out 1 warning sign for Obara Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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