Yamatane (TSE:9305) Has Announced That It Will Be Increasing Its Dividend To ¥50.00

Yamatane Corporation (TSE:9305) will increase its dividend from last year's comparable payment on the 4th of June to ¥50.00. This takes the dividend yield to 2.7%, which shareholders will be pleased with.

See our latest analysis for Yamatane

Yamatane's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Yamatane's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 6.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. Since 2014, the annual payment back then was ¥35.00, compared to the most recent full-year payment of ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. 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.

We Could See Yamatane's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Yamatane has impressed us by growing EPS at 6.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Yamatane's prospects of growing its dividend payments in the future.

Our Thoughts On Yamatane's Dividend

Overall, we always like to see the dividend being raised, but we don't think Yamatane will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Yamatane is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Yamatane (of which 1 is a bit concerning!) you should know about. Is Yamatane 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.