Japan Securities Finance (TSE:8511) Is Due To Pay A Dividend Of ¥42.00

The board of Japan Securities Finance Co., Ltd. (TSE:8511) has announced that it will pay a dividend on the 4th of June, with investors receiving ¥42.00 per share. This makes the dividend yield 3.8%, which is above the industry average.

View our latest analysis for Japan Securities Finance

Japan Securities Finance's Future Dividend Projections Appear 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, Japan Securities Finance was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share could rise by 26.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 62%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ¥14.00 in 2015, and the most recent fiscal year payment was ¥68.00. This means that it has been growing its distributions at 17% per annum over that time. Japan Securities Finance 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. Japan Securities Finance has seen EPS rising for the last five years, at 26% per annum. Japan Securities Finance is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Japan Securities Finance's Dividend

Overall, a dividend increase is always good, and we think that Japan Securities Finance is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Japan Securities Finance has 2 warning signs (and 1 which can't be ignored) we think you should know about. Is Japan Securities Finance not quite the opportunity you were looking for? Why not check out our selection of top dividend 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.