Escrow Agent Japan (TSE:6093) Will Pay A Dividend Of ¥6.00

The board of Escrow Agent Japan, Inc. (TSE:6093) has announced that it will pay a dividend on the 1st of June, with investors receiving ¥6.00 per share. This makes the dividend yield 4.0%, which will augment investor returns quite nicely.

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Escrow Agent Japan's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

EPS is set to fall by 9.1% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 132%, which could put the dividend under pressure if earnings don't start to improve.

Check out our latest analysis for Escrow Agent Japan

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥0.90 in 2015 to the most recent total annual payment of ¥6.00. This means that it has been growing its distributions at 21% per annum over that time. Escrow Agent Japan 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.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Escrow Agent Japan has seen earnings per share falling at 9.1% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

We're Not Big Fans Of Escrow Agent Japan's Dividend

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, the dividend is not reliable enough to make this a good income stock.

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. Case in point: We've spotted 4 warning signs for Escrow Agent Japan (of which 2 can't be ignored!) you should know about. Is Escrow Agent Japan 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.