Yamatane Corporation's (TSE:9305) investors are due to receive a payment of ¥40.00 per share on 2nd of December. This makes the dividend yield 2.8%, which is above the industry average.
Check out our latest analysis for Yamatane
Yamatane's Payment Could Potentially Have 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, 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.
If the trend of the last few years continues, EPS will grow by 2.0% over the next 12 months. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.
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 dividend has gone from ¥35.00 total annually to ¥90.00. This means that it has been growing its distributions at 9.9% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend's Growth Prospects Are Limited
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 2.0% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.
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. To that end, Yamatane has 4 warning signs (and 1 which makes us a bit uncomfortable) we think 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.
About TSE:9305
Yamatane
Engages in the wholesale, import, and export of food and related products in Japan.
Second-rate dividend payer low.
