Takamatsu Construction Group's (TSE:1762) Shareholders Will Receive A Bigger Dividend Than Last Year

Takamatsu Construction Group Co., Ltd. (TSE:1762) will increase its dividend from last year's comparable payment on the 9th of December to ¥45.00. This takes the annual payment to 3.0% of the current stock price, which is about average for the industry.

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Takamatsu Construction Group's Future Dividend Projections Appear Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. The last dividend was quite comfortably covered by Takamatsu Construction Group's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 88% indicates it is more focused on returning cash to shareholders than growing the business.

The next year is set to see EPS grow by 13.8%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Takamatsu Construction Group

Takamatsu Construction Group Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥25.00 in 2015, and the most recent fiscal year payment was ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year 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.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Takamatsu Construction Group has seen earnings per share falling at 5.8% per year over the last five years. 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 predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Takamatsu Construction Group will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Takamatsu Construction Group that you should be aware of before investing. Is Takamatsu Construction Group 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.