Japan Post Insurance (TSE:7181) Has Announced A Dividend Of ¥52.00

The board of Japan Post Insurance Co., Ltd. (TSE:7181) has announced that it will pay a dividend of ¥52.00 per share on the 18th of June. Based on this payment, the dividend yield for the company will be 3.6%, which is fairly typical for the industry.

Check out our latest analysis for Japan Post Insurance

Japan Post Insurance's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Japan Post Insurance is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to fall by 0.5%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 44%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Japan Post Insurance's Dividend Has Lacked Consistency

Looking back, Japan Post Insurance's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the dividend has gone from ¥58.00 total annually to ¥104.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.7% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Japan Post Insurance might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings have grown at around 3.4% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Japan Post Insurance's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Japan Post Insurance is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Japan Post Insurance (3 are a bit concerning!) that you should be aware of before investing. Is Japan Post Insurance not quite the opportunity you were looking for? Why not check out our selection of top 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.