JAFCO Group's (TSE:8595) Shareholders Will Receive A Bigger Dividend Than Last Year

JAFCO Group Co., Ltd. (TSE:8595) will increase its dividend from last year's comparable payment on the 26th of November to ¥66.50. This will take the annual payment to 5.4% of the stock price, which is above what most companies in the industry pay.

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JAFCO Group's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, JAFCO Group was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 13.8%. If the dividend continues on this path, the payout ratio could be 70% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for JAFCO Group

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥33.33, compared to the most recent full-year payment of ¥133.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Growth Potential

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. JAFCO Group has seen EPS rising for the last five years, at 6.9% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On JAFCO Group's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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 JAFCO Group 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.