Yamaha Corporation (TSE:7951) will pay a dividend of ¥37.00 on the 9th of December. The dividend yield will be 2.1% based on this payment which is still above the industry average.
See our latest analysis for Yamaha
Yamaha's Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Yamaha's earnings. This means that a large portion of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to expand by 9.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 39% by next year, which is in a pretty sustainable range.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥15.00 in 2014, and the most recent fiscal year payment was ¥74.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend's Growth Prospects Are Limited
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Yamaha has seen earnings per share falling at 4.9% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
Our Thoughts On Yamaha's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yamaha's payments, as there could be some issues with sustaining them into the future. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Yamaha that investors should know about before committing capital to this stock. 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.
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About TSE:7951
Yamaha
Engages in the musical instruments, audio equipment, and other businesses in Japan and internationally.
Flawless balance sheet average dividend payer.
