E-Guardian (TSE:6050) Is Increasing Its Dividend To ¥31.00

E-Guardian Inc.'s (TSE:6050) dividend will be increasing from last year's payment of the same period to ¥31.00 on 23rd of December. This takes the annual payment to 1.6% of the current stock price, which is about average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that E-Guardian's stock price has increased by 40% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for E-Guardian

E-Guardian's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, E-Guardian's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 4.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

E-Guardian Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥1.67 in 2014, and the most recent fiscal year payment was ¥31.00. This implies that the company grew its distributions at a yearly rate of about 34% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

We Could See E-Guardian's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that E-Guardian has been growing its earnings per share at 5.1% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for E-Guardian's prospects of growing its dividend payments in the future.

We should note that E-Guardian has issued stock equal to 15% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

E-Guardian Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for E-Guardian that you should be aware of before investing. 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.