Toyota Motor (TSE:7203) Will Pay A Dividend Of ¥45.00

The board of Toyota Motor Corporation (TSE:7203) has announced that it will pay a dividend on the 26th of November, with investors receiving ¥45.00 per share. This makes the dividend yield 3.4%, which is above the industry average.

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Toyota Motor's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Toyota Motor is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 0.4% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 31%, which is comfortable for the company to continue in the future.

See our latest analysis for Toyota Motor

Toyota Motor Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from ¥40.00 total annually to ¥95.00. This implies that the company grew its distributions at a yearly rate of about 9.0% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Toyota Motor has grown earnings per share at 24% 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 Toyota Motor's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Toyota Motor's payments are rock solid. While Toyota Motor 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for Toyota Motor (of which 2 shouldn't be ignored!) you should know about. Is Toyota Motor not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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