Japan Pulp and Paper (TSE:8032) Is Increasing Its Dividend To ¥20.00

Japan Pulp and Paper Company Limited (TSE:8032) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of June to ¥20.00. This will take the dividend yield to an attractive 4.7%, providing a nice boost to shareholder returns.

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Japan Pulp and Paper's Projections Indicate Future Payments May Be Unsustainable

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Japan Pulp and Paper's earnings. This means that a large portion of its earnings are being retained to grow the business.

If the company can't turn things around, EPS could fall by 0.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 150%, which could put the dividend in jeopardy if the company's earnings don't improve.

See our latest analysis for Japan Pulp and Paper

Japan Pulp and Paper Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥10.00 in 2015, and the most recent fiscal year payment was ¥40.00. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Japan Pulp and Paper May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Unfortunately, Japan Pulp and Paper's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Japan Pulp and Paper's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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 3 warning signs for Japan Pulp and Paper 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.