Japan Post Insurance (TSE:7181) Will Pay A Dividend Of ¥62.00

The board of Japan Post Insurance Co., Ltd. (TSE:7181) has announced that it will pay a dividend of ¥62.00 per share on the 19th of June. The payment will take the dividend yield to 2.8%, which is in line with the average for the industry.

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Japan Post Insurance's Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Japan Post Insurance was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 3.6%. If the dividend continues on this path, the payout ratio could be 31% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Japan Post Insurance

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥58.00 in 2015, and the most recent fiscal year payment was ¥124.00. This implies that the company grew its distributions at a yearly rate of about 7.9% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Has Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Japan Post Insurance has impressed us by growing EPS at 7.1% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Japan Post Insurance's prospects of growing its dividend payments in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Japan Post Insurance (of which 2 can't be ignored!) you should know about. 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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