Ohba (TSE:9765) Will Pay A Dividend Of ¥21.00

The board of Ohba Co., Ltd. (TSE:9765) has announced that it will pay a dividend on the 4th of February, with investors receiving ¥21.00 per share. This makes the dividend yield 3.7%, which is above the industry average.

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Ohba's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Ohba's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

If the trend of the last few years continues, EPS will grow by 11.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Ohba

Ohba 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 ¥10.00 in 2015, and the most recent fiscal year payment was ¥42.00. This means that it has been growing its distributions at 15% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Ohba has seen EPS rising for the last five years, at 11% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Ohba's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Ohba's payments are rock solid. While Ohba is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Ohba that investors should take into consideration. Is Ohba not quite the opportunity you were looking for? Why not check out our selection of top 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.