Yamaichi ElectronicsLtd (TSE:6941) Is Increasing Its Dividend To ¥35.00

Yamaichi Electronics Co.,Ltd.'s (TSE:6941) dividend will be increasing from last year's payment of the same period to ¥35.00 on 6th of December. This makes the dividend yield 2.4%, which is above the industry average.

View our latest analysis for Yamaichi ElectronicsLtd

Yamaichi ElectronicsLtd's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Yamaichi ElectronicsLtd was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 30.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ¥5.00, compared to the most recent full-year payment of ¥74.00. This means that it has been growing its distributions at 31% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Yamaichi ElectronicsLtd's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Yamaichi ElectronicsLtd's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Yamaichi ElectronicsLtd will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Yamaichi ElectronicsLtd you should be aware of, and 1 of them is a bit unpleasant. 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.

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