Toyota Motor's (TSE:7203) Dividend Will Be ¥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 will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

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Toyota Motor's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Toyota Motor's 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 1.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Toyota Motor

Toyota Motor Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥40.00 total annually to ¥95.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.0% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Toyota Motor has seen EPS rising for the last five years, at 24% per annum. 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

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Toyota Motor is a great stock to add to your portfolio if income is your focus.

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. To that end, Toyota Motor has 4 warning signs (and 2 which shouldn't be ignored) we think 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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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.