Yamazen (TSE:8051) Will Pay A Dividend Of ¥32.00
The board of Yamazen Corporation (TSE:8051) has announced that it will pay a dividend on the 15th of June, with investors receiving ¥32.00 per share. This makes the dividend yield 3.5%, which will augment investor returns quite nicely.
Yamazen'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. Before making this announcement, Yamazen was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
If the trend of the last few years continues, EPS will grow by 8.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.
See our latest analysis for Yamazen
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ¥24.00 in 2016 to the most recent total annual payment of ¥52.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.0% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
We Could See Yamazen's Dividend Growing
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. We are encouraged to see that Yamazen has grown earnings per share at 8.7% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.
Our Thoughts On Yamazen's Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Yamazen (of which 1 is significant!) you should know about. 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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