Vertex (TSE:5290) Has Announced That It Will Be Increasing Its Dividend To ¥50.00

Vertex Corporation (TSE:5290) will increase its dividend from last year's comparable payment on the 30th of June to ¥50.00. The payment will take the dividend yield to 2.7%, which is in line with the average for the industry.

See our latest analysis for Vertex

Vertex's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Vertex was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 9.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Vertex Doesn't Have A Long Payment History

Vertex's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of ¥16.67 in 2019 to the most recent total annual payment of ¥50.00. This means that it has been growing its distributions at 20% per annum over that time. Vertex has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Vertex Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Vertex has seen EPS rising for the last five years, at 9.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Vertex's prospects of growing its dividend payments in the future.

We Really Like Vertex's Dividend

Overall, a dividend increase is always good, and we think that Vertex is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Vertex 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.