Obara Group (TSE:6877) Is Paying Out A Dividend Of ¥60.00

Obara Group Incorporated's (TSE:6877) investors are due to receive a payment of ¥60.00 per share on 2nd of June. This makes the dividend yield 3.9%, which will augment investor returns quite nicely.

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Obara Group'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, Obara Group was paying only paying out a fraction of earnings, but the payment was a massive 153% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share could rise by 8.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Obara Group

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2016, the annual payment back then was ¥60.00, compared to the most recent full-year payment of ¥150.00. This means that it has been growing its distributions at 9.6% 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.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Obara Group has impressed us by growing EPS at 8.8% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Obara Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.