Yamada Holdings (TSE:9831) Is Due To Pay A Dividend Of ¥13.00

The board of Yamada Holdings Co., Ltd. (TSE:9831) has announced that it will pay a dividend of ¥13.00 per share on the 30th of June. This makes the dividend yield 3.0%, which will augment investor returns quite nicely.

Check out our latest analysis for Yamada Holdings

Yamada Holdings' Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Yamada Holdings was paying only paying out a fraction of earnings, but the payment was a massive 128% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to rise by 14.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥6.00, compared to the most recent full-year payment of ¥13.00. This means that it has been growing its distributions at 8.0% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Yamada Holdings might have put its house in order since then, but we remain cautious.

Yamada Holdings May Find It Hard To Grow The Dividend

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. Unfortunately, Yamada Holdings' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Yamada Holdings you should be aware of, and 1 of them is a bit concerning. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.