Yotai Refractories (TSE:5357) Has Announced A Dividend Of ¥45.00

The board of Yotai Refractories Co., Ltd. (TSE:5357) has announced that it will pay a dividend of ¥45.00 per share on the 29th of June. This makes the dividend yield 5.1%, which will augment investor returns quite nicely.

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Yotai Refractories' Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Yotai Refractories' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 124% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Earnings per share could rise by 3.3% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 90% which is a bit high but can definitely be sustainable.

View our latest analysis for Yotai Refractories

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥90.00. This means that it has been growing its distributions at 25% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Yotai Refractories May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings have grown at around 3.3% a year for the past five years, which isn't massive but still better than seeing them shrink. Yotai Refractories' earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Our Thoughts On Yotai Refractories' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Yotai Refractories' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. Taking the debate a bit further, we've identified 2 warning signs for Yotai Refractories that investors need to be conscious of moving forward. Is Yotai Refractories not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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