Joshin Denki's (TSE:8173) Shareholders Will Receive A Bigger Dividend Than Last Year

Joshin Denki Co., Ltd.'s (TSE:8173) dividend will be increasing from last year's payment of the same period to ¥100.00 on 26th of June. This will take the dividend yield to an attractive 4.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for Joshin Denki

Joshin Denki's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Joshin Denki's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

If the company can't turn things around, EPS could fall by 10.4% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 81% in the next 12 months which is on the higher end of the range we would say is sustainable.

Joshin Denki Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥32.00 total annually to ¥100.00. This means that it has been growing its distributions at 12% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Joshin Denki's earnings per share has shrunk at 10% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Joshin Denki's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Joshin Denki's payments are rock solid. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Joshin Denki (of which 2 are a bit concerning!) you should know about. Is Joshin Denki 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.