The board of JANOME Corporation (TSE:6445) has announced that it will be paying its dividend of ¥35.00 on the 23rd of June, an increased payment from last year's comparable dividend. This takes the dividend yield to 4.7%, which shareholders will be pleased with.
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, JANOME's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Looking forward, EPS could fall by 23.1% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 252%, which could put the dividend in jeopardy if the company's earnings don't improve.
Check out our latest analysis for JANOME
The company has an extended history of paying stable dividends. Since 2016, the dividend has gone from ¥10.00 total annually to ¥55.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. 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.
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. JANOME's EPS has fallen by approximately 23% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
Overall, we always like to see the dividend being raised, but we don't think JANOME will make a great income stock. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think JANOME is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 4 warning signs for JANOME you should be aware of, and 1 of them is significant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.