Business Brain Showa-Ota (TSE:9658) Is Due To Pay A Dividend Of ¥37.00

The board of Business Brain Showa-Ota Inc. (TSE:9658) has announced that it will pay a dividend on the 2nd of December, with investors receiving ¥37.00 per share. This will take the dividend yield to an attractive 3.6%, providing a nice boost to shareholder returns.

Check out our latest analysis for Business Brain Showa-Ota

Business Brain Showa-Ota's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Business Brain Showa-Ota's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 70.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 4.4%, which is in the range that makes us comfortable with the sustainability of the dividend.

Business Brain Showa-Ota Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was ¥9.00, compared to the most recent full-year payment of ¥78.00. This implies that the company grew its distributions at a yearly rate of about 24% 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Business Brain Showa-Ota has grown earnings per share at 70% 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.

Business Brain Showa-Ota Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Business Brain Showa-Ota is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend 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. Taking the debate a bit further, we've identified 1 warning sign for Business Brain Showa-Ota that investors need to be conscious of moving forward. Is Business Brain Showa-Ota 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.

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