The board of J-Oil Mills, Inc. (TSE:2613) has announced that it will pay a dividend of ¥30.00 per share on the 4th of December. The dividend yield will be 3.0% based on this payment which is still above the industry average.
See our latest analysis for J-Oil Mills
J-Oil Mills' Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, J-Oil Mills was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 12.2% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 34%, which we are pretty comfortable with and we think is feasible on an earnings basis.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ¥40.00 in 2014, and the most recent fiscal year payment was ¥60.00. This implies that the company grew its distributions at a yearly rate of about 4.1% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
We Could See J-Oil Mills' Dividend Growing
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that J-Oil Mills has grown earnings per share at 7.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for J-Oil Mills' prospects of growing its dividend payments in the future.
In Summary
Overall, a consistent dividend is a good thing, and we think that J-Oil Mills has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, J-Oil Mills has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.
About TSE:2613
Undervalued with excellent balance sheet and pays a dividend.
