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

The board of Yamaichi Electronics Co.,Ltd. (TSE:6941) has announced that it will be paying its dividend of ¥35.00 on the 6th of December, an increased payment from last year's comparable dividend. This takes the dividend yield to 3.6%, which shareholders will be pleased with.

See our latest analysis for Yamaichi ElectronicsLtd

Yamaichi ElectronicsLtd's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Yamaichi ElectronicsLtd's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 14.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

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. The dividend has gone from an annual total of ¥5.00 in 2014 to the most recent total annual payment of ¥89.00. This means that it has been growing its distributions at 33% 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.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Yamaichi ElectronicsLtd has grown earnings per share at 25% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On Yamaichi ElectronicsLtd's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Yamaichi ElectronicsLtd is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Yamaichi ElectronicsLtd (of which 1 is concerning!) you should know about. 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.