Yamatane Corporation (TSE:9305) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of June to ¥40.00. This will take the dividend yield to an attractive 2.1%, providing a nice boost to shareholder returns.
View our latest analysis for Yamatane
Yamatane's Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Yamatane was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Unless the company can turn things around, EPS could fall by 1.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 29%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥57.00. This means that it has been growing its distributions at 6.6% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend's Growth Prospects Are Limited
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Yamatane's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.
Yamatane's Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Yamatane's payments are rock solid. While Yamatane is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Yamatane you should be aware of, and 1 of them doesn't sit too well with us. 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.
About TSE:9305
Yamatane
Engages in the wholesale, import, and export of food and related products in Japan.
Second-rate dividend payer low.
