Taisei's (TSE:1801) Dividend Will Be ¥65.00

The board of Taisei Corporation (TSE:1801) has announced that it will pay a dividend of ¥65.00 per share on the 23rd of June. Including this payment, the dividend yield on the stock will be 2.0%, which is a modest boost for shareholders' returns.

See our latest analysis for Taisei

Taisei's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Taisei's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 12.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Taisei Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥25.00 in 2014, and the most recent fiscal year payment was ¥130.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% 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

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Taisei's EPS has declined at around 7.4% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Taisei's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Taisei is earning enough to cover the payments, the cash flows are lacking. We don't think Taisei is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Taisei you should be aware of, and 1 of them is a bit unpleasant. Is Taisei 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.