Yashima Denki (TSE:3153) Will Pay A Larger Dividend Than Last Year At ¥32.00

Yashima Denki Co., Ltd. (TSE:3153) has announced that it will be increasing its dividend from last year's comparable payment on the 5th of June to ¥32.00. This will take the annual payment to 2.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Yashima Denki

Yashima Denki's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Yashima Denki was paying only paying out a fraction of earnings, but the payment was a massive 117% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share could rise by 8.1% 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 27% by next year, which is in a pretty sustainable range.

Yashima Denki 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 ¥13.00 in 2014 to the most recent total annual payment of ¥32.00. This implies that the company grew its distributions at a yearly rate of about 9.4% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Yashima Denki has seen EPS rising for the last five years, at 8.1% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Yashima Denki's prospects of growing its dividend payments in the future.

Our Thoughts On Yashima Denki's Dividend

Overall, we always like to see the dividend being raised, but we don't think Yashima Denki will make a great income stock. While Yashima Denki is earning enough to cover the payments, the cash flows are lacking. We don't think Yashima Denki is a great stock to add to your portfolio if income is your focus.

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. For example, we've picked out 1 warning sign for Yashima Denki that investors should know about before committing capital to this stock. Is Yashima Denki 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.