J-LeaseLtd (TSE:7187) Will Pay A Dividend Of ¥22.50

The board of J-Lease Co.,Ltd. (TSE:7187) has announced that it will pay a dividend on the 26th of June, with investors receiving ¥22.50 per share. Based on this payment, the dividend yield will be 3.4%, which is fairly typical for the industry.

See our latest analysis for J-LeaseLtd

J-LeaseLtd's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, J-LeaseLtd was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 8.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 47% by next year, which is in a pretty sustainable range.

J-LeaseLtd's Dividend Has Lacked Consistency

Looking back, J-LeaseLtd's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was ¥2.50, compared to the most recent full-year payment of ¥45.00. This works out to be a compound annual growth rate (CAGR) of approximately 51% a year over that time. J-LeaseLtd has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that J-LeaseLtd has been growing its earnings per share at 96% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like J-LeaseLtd's Dividend

Overall, we like to see the dividend staying consistent, and we think J-LeaseLtd might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for J-LeaseLtd that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.