Japan Pulp and Paper (TSE:8032) Is Increasing Its Dividend To ¥125.00

The board of Japan Pulp and Paper Company Limited (TSE:8032) has announced that it will be paying its dividend of ¥125.00 on the 2nd of December, an increased payment from last year's comparable dividend. This takes the dividend yield to 4.0%, which shareholders will be pleased with.

Check out our latest analysis for Japan Pulp and Paper

Japan Pulp and Paper's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Japan Pulp and Paper's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 22.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Japan Pulp and Paper Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥100.00 in 2014, and the most recent fiscal year payment was ¥250.00. This means that it has been growing its distributions at 9.6% per annum 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 Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Japan Pulp and Paper has grown earnings per share at 22% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Japan Pulp and Paper Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Japan Pulp and Paper is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Japan Pulp and Paper that investors should know about before committing capital to this stock. 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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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.