Business Brain Showa-Ota's (TSE:9658) Dividend Will Be Increased To ¥39.00

The board of Business Brain Showa-Ota Inc. (TSE:9658) has announced that it will be increasing its dividend by 50% on the 26th of June to ¥39.00, up from last year's comparable payment of ¥26.00. This makes the dividend yield 2.9%, which is above the industry average.

Check out our latest analysis for Business Brain Showa-Ota

Business Brain Showa-Ota's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Business Brain Showa-Ota was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 71.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 4.3% by next year, which is in a pretty sustainable range.

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. The dividend has gone from an annual total of ¥8.00 in 2014 to the most recent total annual payment of ¥62.00. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year 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

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 72% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Business Brain Showa-Ota 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.