Lacto Japan's (TSE:3139) Shareholders Will Receive A Bigger Dividend Than Last Year

Lacto Japan Co., Ltd. (TSE:3139) will increase its dividend from last year's comparable payment on the 26th of August to ¥31.00. This will take the dividend yield to an attractive 2.5%, providing a nice boost to shareholder returns.

See our latest analysis for Lacto Japan

Lacto Japan's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Lacto Japan's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 23.3% over the next year. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

Lacto Japan Is Still Building Its Track Record

Lacto Japan's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of ¥15.00 in 2015 to the most recent total annual payment of ¥62.00. This means that it has been growing its distributions at 17% per annum over that time. Lacto Japan 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 Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Lacto Japan has seen EPS rising for the last five years, at 6.9% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Lacto Japan you should be aware of, and 1 of them doesn't sit too well with us. Is Lacto Japan not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.