YAMADA Consulting GroupLtd (TSE:4792) Has Affirmed Its Dividend Of ¥38.00

The board of YAMADA Consulting Group Co.,Ltd. (TSE:4792) has announced that it will pay a dividend on the 5th of December, with investors receiving ¥38.00 per share. This means the annual payment is 4.1% of the current stock price, which is above the average for the industry.

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YAMADA Consulting GroupLtd's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, YAMADA Consulting GroupLtd was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

If the trend of the last few years continues, EPS will grow by 15.0% over the next 12 months. If the dividend continues on this path, the payout ratio could be 71% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for YAMADA Consulting GroupLtd

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 ¥22.50 in 2015, and the most recent fiscal year payment was ¥77.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. YAMADA Consulting GroupLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. YAMADA Consulting GroupLtd has impressed us by growing EPS at 15% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On YAMADA Consulting GroupLtd's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about YAMADA Consulting GroupLtd's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for YAMADA Consulting GroupLtd you should be aware of, and 1 of them can't be ignored. Is YAMADA Consulting GroupLtd 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.