Business Brain Showa-Ota's (TSE:9658) Upcoming Dividend Will Be Larger Than Last Year's

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 will take the annual payment to 2.8% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Business Brain Showa-Ota

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. 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.

Looking forward, earnings per share could rise by 71.5% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 4.3%, which is in the range that makes us comfortable with the sustainability of the dividend.

Business Brain Showa-Ota Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥8.00 in 2014, and the most recent fiscal year payment was ¥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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Business Brain Showa-Ota has grown earnings per share at 72% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Business Brain Showa-Ota's Dividend

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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Business Brain Showa-Ota that investors should know about before committing capital to this stock. 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.