Watami (TSE:7522) Has Announced A Dividend Of ¥10.00

The board of Watami Co., Ltd. (TSE:7522) has announced that it will pay a dividend on the 30th of June, with investors receiving ¥10.00 per share. Based on this payment, the dividend yield on the company's stock will be 1.0%, which is an attractive boost to shareholder returns.

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Watami'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. Before making this announcement, Watami was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 68.6% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 6.8% by next year, which is in a pretty sustainable range.

View our latest analysis for Watami

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The last annual payment of ¥10.00 was flat on the annual payment from10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Watami has been growing its earnings per share at 69% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Watami Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Watami might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Now, if you want to look closer, it would be worth checking out our free research on Watami management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.