Japan Cash Machine (TSE:6418) Has Announced A Dividend Of ¥20.00

The board of Japan Cash Machine Co., Ltd. (TSE:6418) has announced that it will pay a dividend on the 5th of December, with investors receiving ¥20.00 per share. This will take the dividend yield to an attractive 4.1%, providing a nice boost to shareholder returns.

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Japan Cash Machine's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Japan Cash Machine was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 65.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Japan Cash Machine

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was ¥17.00, compared to the most recent full-year payment of ¥40.00. This means that it has been growing its distributions at 8.9% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Japan Cash Machine has been growing its earnings per share at 65% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Japan Cash Machine's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Japan Cash Machine that investors need to be conscious of moving forward. Is Japan Cash Machine 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.