Okura Industrial (TSE:4221) Has Announced A Dividend Of ¥95.00

Okura Industrial Co., Ltd. (TSE:4221) will pay a dividend of ¥95.00 on the 3rd of September. This takes the dividend yield to 5.3%, which shareholders will be pleased with.

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Okura Industrial's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Okura Industrial's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 9.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 54% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Okura Industrial

Okura Industrial Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥37.50 in 2015 to the most recent total annual payment of ¥195.00. This means that it has been growing its distributions at 18% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Has Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Okura Industrial has seen EPS rising for the last five years, at 9.4% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Okura Industrial's Dividend

Overall, we always like to see the dividend being raised, but we don't think Okura Industrial 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 Okura Industrial is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Okura Industrial that investors need to be conscious of moving forward. 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.