OPTEX GROUP Company (TSE:6914) Is Increasing Its Dividend To ¥22.50

The board of OPTEX GROUP Company, Limited (TSE:6914) has announced that it will be paying its dividend of ¥22.50 on the 3rd of September, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 2.9%, providing a nice boost to shareholder returns.

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OPTEX GROUP Company's Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, OPTEX GROUP Company's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 8.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for OPTEX GROUP Company

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ¥15.00, compared to the most recent full-year payment of ¥45.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. OPTEX GROUP Company has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. OPTEX GROUP Company has seen EPS rising for the last five years, at 25% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

OPTEX GROUP Company Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that OPTEX GROUP Company is a strong income stock thanks to its track record and growing earnings. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for OPTEX GROUP Company that you should be aware of before investing. Is OPTEX GROUP Company 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.