The board of Yamazen Corporation (TSE:8051) has announced that it will pay a dividend on the 9th of December, with investors receiving ¥20.00 per share. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.
See our latest analysis for Yamazen
Yamazen's Earnings Easily Cover The Distributions
If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 80% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
If the company can't turn things around, EPS could fall by 11.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 94%, which is definitely on the higher side.
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 ¥15.00 total annually to ¥51.00. This means that it has been growing its distributions at 13% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 11% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
Our Thoughts On Yamazen's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Yamazen is a great stock to add to your portfolio if income is your focus.
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. Taking the debate a bit further, we've identified 2 warning signs for Yamazen that investors need to be conscious of moving forward. 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.
About TSE:8051
Yamazen
Provides production equipment, housing equipment/materials, and home products worldwide.
Excellent balance sheet average dividend payer.
