Yokowo's (TSE:6800) Shareholders Will Receive A Bigger Dividend Than Last Year

Yokowo Co., Ltd. (TSE:6800) will increase its dividend from last year's comparable payment on the 11th of December to ¥24.00. This takes the dividend yield to 2.6%, which shareholders will be pleased with.

View our latest analysis for Yokowo

Yokowo's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Yokowo is unprofitable despite paying a dividend, and it is paying out 2,729% of its free cash flow. This is quite a strong warning sign that the dividend may not be sustainable.

The next year is set to see EPS grow by 26.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which is in the range that makes us comfortable with the sustainability of the dividend.

Yokowo Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ¥9.00, compared to the most recent full-year payment of ¥48.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. In the last five years, Yokowo's earnings per share has shrunk at approximately 9.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Yokowo's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Yokowo will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Yokowo (1 doesn't sit too well with us!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com