Japan Process Development's (TSE:9651) Dividend Will Be ¥33.00

The board of Japan Process Development Co., Ltd. (TSE:9651) has announced that it will pay a dividend on the 4th of February, with investors receiving ¥33.00 per share. This makes the dividend yield 3.8%, which is above the industry average.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Japan Process Development's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Japan Process Development's dividend was only 35% of earnings, however it was paying out 118% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Over the next year, EPS could expand by 21.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 41%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Japan Process Development

Japan Process Development Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥15.00, compared to the most recent full-year payment of ¥58.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Japan Process Development has impressed us by growing EPS at 22% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Japan Process Development's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Japan Process Development (of which 1 makes us a bit uncomfortable!) you should know about. Is Japan Process Development not quite the opportunity you were looking for? Why not check out our selection of top 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.