Yamatane Corporation (TSE:9305) will pay a dividend of ¥40.00 on the 2nd of December. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Yamatane
Yamatane's Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Yamatane is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
If the trend of the last few years continues, EPS will grow by 2.8% over the next 12 months. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.
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 ¥35.00 total annually to ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.9% a year 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. Yamatane might have put its house in order since then, but we remain cautious.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 2.8% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Yamatane could always pay out a higher proportion of earnings to increase shareholder returns.
In Summary
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.
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. Case in point: We've spotted 3 warning signs for Yamatane (of which 1 is potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
About TSE:9305
Yamatane
Engages in the wholesale, import, and export of food and related products in Japan.
Slight second-rate dividend payer.
