Business Brain Showa-Ota (TSE:9658) Is Increasing Its Dividend To ¥41.00

The board of Business Brain Showa-Ota Inc. (TSE:9658) has announced that it will be paying its dividend of ¥41.00 on the 24th of June, an increased payment from last year's comparable dividend. This makes the dividend yield 3.1%, which is above the industry average.

Check out our latest analysis for Business Brain Showa-Ota

Business Brain Showa-Ota's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Business Brain Showa-Ota'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 could rise by 17.4% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 35% by next year, which is in a pretty sustainable range.

Business Brain Showa-Ota Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the annual payment back then was ¥10.00, compared to the most recent full-year payment of ¥78.00. This means that it has been growing its distributions at 23% per annum 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Business Brain Showa-Ota has impressed us by growing EPS at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Business Brain Showa-Ota's Dividend

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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing 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. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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