Yokohama Rubber Company (TSE:5101) Is Increasing Its Dividend To ¥64.00
The board of The Yokohama Rubber Company, Limited (TSE:5101) has announced that it will be paying its dividend of ¥64.00 on the 31st of March, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.9%, which is below the industry average.
Yokohama Rubber Company's Future Dividend Projections Appear Well Covered By Earnings
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, based ont he last payment, Yokohama Rubber Company was earning enough to cover the dividend pretty comfortably. The business is earning enough to make the dividend feasible, but the cash payout ratio of 91% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.
The next year is set to see EPS grow by 12.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.
See our latest analysis for Yokohama Rubber Company
Yokohama Rubber Company Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was ¥52.00, compared to the most recent full-year payment of ¥112.00. This means that it has been growing its distributions at 8.0% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Yokohama Rubber Company has seen EPS rising for the last five years, at 35% per annum. 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.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Yokohama Rubber Company that you should be aware of before investing. Is Yokohama Rubber 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.