Yuasa Trading's (TSE:8074) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Yuasa Trading Co., Ltd. (TSE:8074) has announced that it will be paying its dividend of ¥96.00 on the 5th of June, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.6%, which shareholders will be pleased with.

See our latest analysis for Yuasa Trading

Yuasa Trading's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Yuasa Trading is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 10.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ¥60.00 in 2014, and the most recent fiscal year payment was ¥182.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Yuasa Trading has seen EPS rising for the last five years, at 10% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Yuasa Trading's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Yuasa Trading's payments are rock solid. While Yuasa Trading is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Yuasa Trading that investors should know about before committing capital to this stock. 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.