JANOME's (TSE:6445) Dividend Will Be ¥20.00

JANOME Corporation (TSE:6445) has announced that it will pay a dividend of ¥20.00 per share on the 25th of November. This takes the dividend yield to 4.5%, which shareholders will be pleased with.

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JANOME's Projections Indicate Future Payments May Be Unsustainable

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, JANOME's dividend made up quite a large proportion of earnings but only 69% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

EPS is set to fall by 5.5% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 115%, which is definitely a bit high to be sustainable going forward.

Check out our latest analysis for JANOME

JANOME Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 9 years was ¥10.00 in 2016, and the most recent fiscal year payment was ¥55.00. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. JANOME 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.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. JANOME has seen earnings per share falling at 5.5% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On JANOME's Dividend

In summary, while it's always good to see the dividend being raised, we don't think JANOME's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

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. To that end, JANOME has 2 warning signs (and 1 which is significant) we think you should know about. 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.