Osaki Electric's (TSE:6644) Dividend Will Be Increased To ¥17.00

Osaki Electric Co., Ltd. (TSE:6644) will increase its dividend from last year's comparable payment on the 5th of December to ¥17.00. This will take the dividend yield to an attractive 3.5%, providing a nice boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Osaki Electric's stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Osaki Electric's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Osaki Electric'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 is forecast to rise by 5.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

See our latest analysis for Osaki Electric

Osaki Electric Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the annual payment back then was ¥12.00, compared to the most recent full-year payment of ¥35.00. This means that it has been growing its distributions at 11% per annum 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 could be attracted to the stock based on the quality of its payment history. Osaki Electric has impressed us by growing EPS at 26% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Osaki Electric's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in Osaki Electric in our latest insider ownership analysis. Is Osaki Electric 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.