Toyota Motor's (TSE:7203) Upcoming Dividend Will Be Larger Than Last Year's

Toyota Motor Corporation (TSE:7203) will increase its dividend from last year's comparable payment on the 26th of May to ¥50.00. This takes the dividend yield to 3.4%, which shareholders will be pleased with.

Check out our latest analysis for Toyota Motor

Toyota Motor's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Toyota Motor was earning enough to cover the dividend, but free cash flows weren't positive. 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 1.7%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Toyota Motor Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from ¥26.00 total annually to ¥90.00. This means that it has been growing its distributions at 13% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Toyota Motor has seen EPS rising for the last five years, at 19% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Toyota Motor's prospects of growing its dividend payments in the future.

In Summary

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 the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Toyota Motor you should be aware of, and 1 of them doesn't sit too well with us. 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.