Japan Pulp and Paper's (TSE:8032) Dividend Will Be ¥65.00

Japan Pulp and Paper Company Limited's (TSE:8032) investors are due to receive a payment of ¥65.00 per share on 26th of June. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

See our latest analysis for Japan Pulp and Paper

Japan Pulp and Paper's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Japan Pulp and Paper's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 14.3% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

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 dividend has gone from an annual total of ¥100.00 in 2014 to the most recent total annual payment of ¥130.00. This implies that the company grew its distributions at a yearly rate of about 2.7% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Japan Pulp and Paper has seen EPS rising for the last five years, at 14% per annum. Japan Pulp and Paper definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Japan Pulp and Paper's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Japan Pulp and Paper's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Japan Pulp and Paper has 3 warning signs (and 1 which is a bit unpleasant) we think 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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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.