Insource (TSE:6200) Is Increasing Its Dividend To ¥19.50

Insource Co., Ltd. (TSE:6200) has announced that it will be increasing its dividend from last year's comparable payment on the 18th of December to ¥19.50. This takes the dividend yield to 1.8%, which shareholders will be pleased with.

Check out our latest analysis for Insource

Insource's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Insource was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 18.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

Insource Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the annual payment back then was ¥1.30, compared to the most recent full-year payment of ¥19.50. This works out to be a compound annual growth rate (CAGR) of approximately 40% a year over that time. Insource has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Insource has grown earnings per share at 32% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Insource Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Insource is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 Insource analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.