Uoriki (TSE:7596) Will Pay A Dividend Of ¥26.00

Uoriki Co., Ltd.'s (TSE:7596) investors are due to receive a payment of ¥26.00 per share on 28th of November. This takes the dividend yield to 2.1%, which shareholders will be pleased with.

Check out our latest analysis for Uoriki

Uoriki's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Uoriki's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 4.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ¥30.00 total annually to ¥52.00. This means that it has been growing its distributions at 5.7% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Uoriki might have put its house in order since then, but we remain cautious.

Uoriki May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Uoriki has only grown its earnings per share at 4.5% per annum over the past five years. Growth of 4.5% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Uoriki that investors need to be conscious of moving forward. Is Uoriki not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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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