Iwatsuka Confectionery's (TSE:2221) Shareholders Will Receive A Bigger Dividend Than Last Year

Iwatsuka Confectionery Co., Ltd.'s (TSE:2221) dividend will be increasing from last year's payment of the same period to ¥39.00 on 1st of July. Based on this payment, the dividend yield for the company will be 1.4%, which is fairly typical for the industry.

View our latest analysis for Iwatsuka Confectionery

Iwatsuka Confectionery's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, Iwatsuka Confectionery's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 2.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

Iwatsuka Confectionery Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥13.00 in 2014 to the most recent total annual payment of ¥39.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 2.7% per year. If Iwatsuka Confectionery is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We Really Like Iwatsuka Confectionery's Dividend

Overall, a dividend increase is always good, and we think that Iwatsuka Confectionery is a strong income stock thanks to its track record and growing earnings. 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.

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. Taking the debate a bit further, we've identified 1 warning sign for Iwatsuka Confectionery that investors need to be conscious of moving forward. 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.