Lacto Japan (TSE:3139) Will Pay A Larger Dividend Than Last Year At ¥82.00

Lacto Japan Co., Ltd. (TSE:3139) will increase its dividend from last year's comparable payment on the 27th of February to ¥82.00. This takes the dividend yield to 4.5%, which shareholders will be pleased with.

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Lacto Japan's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Lacto Japan was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 3.1% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 39%, which is comfortable for the company to continue in the future.

Check out our latest analysis for Lacto Japan

Lacto Japan Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥15.00 in 2015 to the most recent total annual payment of ¥164.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Lacto Japan has grown earnings per share at 15% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Lacto Japan's Dividend

Overall, we always like to see the dividend being raised, but we don't think Lacto Japan will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Lacto Japan is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Lacto Japan you should be aware of, and 2 of them are concerning. 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.