Chino's (TSE:6850) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Chino Corporation (TSE:6850) has announced that it will be increasing its dividend by 13% on the 30th of June to ¥45.00, up from last year's comparable payment of ¥40.00. This makes the dividend yield 3.0%, which is above the industry average.

See our latest analysis for Chino

Chino's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Chino's dividend was only 19% of earnings, however it was paying out 154% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

The next year is set to see EPS grow by 11.7%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

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 2014, the dividend has gone from ¥35.00 total annually to ¥65.00. This means that it has been growing its distributions at 6.4% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

We Could See Chino's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Chino has been growing its earnings per share at 5.4% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Chino's Dividend

Overall, we always like to see the dividend being raised, but we don't think Chino will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Chino 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Chino that investors should take into consideration. Is Chino 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.