Joshin Denki (TSE:8173) Is Increasing Its Dividend To ¥100.00

The board of Joshin Denki Co., Ltd. (TSE:8173) has announced that it will be paying its dividend of ¥100.00 on the 26th of June, an increased payment from last year's comparable dividend. This makes the dividend yield 4.4%, which is above the industry average.

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Joshin Denki's Projections Indicate Future Payments May Be Unsustainable

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Joshin Denki's dividend was making up a very large proportion of earnings, and the company was also not generating any cash flow to offset this. We think that this practice can make the dividend quite risky in the future.

Looking forward, EPS could fall by 10.9% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 103%, which could put the dividend in jeopardy if the company's earnings don't improve.

Check out our latest analysis for Joshin Denki

Joshin Denki Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥32.00, compared to the most recent full-year payment of ¥100.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Limited Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Joshin Denki's EPS has declined at around 11% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On Joshin Denki's Dividend

Overall, we always like to see the dividend being raised, but we don't think Joshin Denki will make a great income stock. While Joshin Denki is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 5 warning signs for Joshin Denki (2 make us uncomfortable!) that you should be aware of before investing. 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.