Takamatsu Construction Group's (TSE:1762) Dividend Will Be Increased To ¥50.00

Takamatsu Construction Group Co., Ltd. (TSE:1762) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of June to ¥50.00. The payment will take the dividend yield to 2.8%, which is in line with the average for the industry.

Check out our latest analysis for Takamatsu Construction Group

Takamatsu Construction Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Takamatsu Construction Group is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 16.3%. If the dividend continues on this path, the payout ratio could be 37% by next year, which we think can be pretty sustainable going forward.

Takamatsu Construction Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of ¥23.00 in 2014 to the most recent total annual payment of ¥77.00. This means that it has been growing its distributions at 13% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Takamatsu Construction Group May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Although it's important to note that Takamatsu Construction Group's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. If Takamatsu Construction Group is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Takamatsu Construction Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Takamatsu Construction Group's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Takamatsu Construction Group 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Takamatsu Construction Group that investors need to be conscious of moving forward. 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.