Business Engineering (TSE:4828) Is Increasing Its Dividend To ¥78.00

Business Engineering Corporation (TSE:4828) will increase its dividend from last year's comparable payment on the 3rd of December to ¥78.00. This takes the dividend yield to 3.1%, which shareholders will be pleased with.

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Business Engineering's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. But before making this announcement, Business Engineering's earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Looking forward, earnings per share is forecast to rise by 10.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 55% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Business Engineering

Business Engineering Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥7.00 in 2015, and the most recent fiscal year payment was ¥156.00. This means that it has been growing its distributions at 36% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Business Engineering has impressed us by growing EPS at 31% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Business Engineering's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Business Engineering (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Business Engineering 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.