TS TECH's (TSE:7313) Shareholders Will Receive A Bigger Dividend Than Last Year

TS TECH Co., Ltd.'s (TSE:7313) dividend will be increasing from last year's payment of the same period to ¥44.00 on 1st of December. This takes the dividend yield to 5.2%, which shareholders will be pleased with.

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TS TECH's Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, TS TECH was paying out quite a large proportion of both earnings and cash flow, with the dividend being 202% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

Over the next year, EPS is forecast to expand by 21.5%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 108% over the next year.

View our latest analysis for TS TECH

TS TECH Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ¥30.00 in 2015, and the most recent fiscal year payment was ¥90.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though TS TECH's EPS has declined at around 8.1% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

TS TECH's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We don't think TS TECH is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for TS TECH that investors need to be conscious of moving forward. Is TS TECH 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.