Lacto Japan (TSE:3139) Has Announced That It Will Be Increasing Its Dividend To ¥45.00

Lacto Japan Co., Ltd.'s (TSE:3139) dividend will be increasing from last year's payment of the same period to ¥45.00 on 28th of February. This takes the dividend yield to 2.6%, which shareholders will be pleased with.

Check out our latest analysis for Lacto Japan

Lacto Japan's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Lacto Japan was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 8.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Lacto Japan Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. Since 2015, the annual payment back then was ¥15.00, compared to the most recent full-year payment of ¥76.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Lacto Japan Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. Lacto Japan has impressed us by growing EPS at 7.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Lacto Japan's prospects of growing its dividend payments in the future.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Lacto Japan 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.