The board of The Japan Steel Works, Ltd. (TSE:5631) has announced that it will pay a dividend of ¥44.00 per share on the 15th of December. Even though the dividend went up, the yield is still quite low at only 1.0%.
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Japan Steel Works’ Projected Earnings Seem Likely To Cover Future Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Japan Steel Works’ earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
The next year is set to see EPS grow by 13.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.
TSE:5631 Historic Dividend September 2nd 2025
See our latest analysis for Japan Steel Works
Dividend Volatility
The company has a long dividend track record, but it doesn’t look great with cuts in the past. Since 2015, the dividend has gone from ¥20.00 total annually to ¥88.00. This means that it has been growing its distributions at 16% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Japan Steel Works has impressed us by growing EPS at 37% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Our Thoughts On Japan Steel Works’ Dividend
Overall, we always like to see the dividend being raised, but we don’t think Japan Steel Works will make a great income stock. While Japan Steel Works is earning enough to cover the payments, the cash flows are lacking. Overall, we don’t think this company has the makings of a good income stock.
It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we’ve picked out 1 warning sign for Japan Steel Works that investors should take into consideration. 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.
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