Tanabe Engineering's (TSE:1828) Upcoming Dividend Will Be Larger Than Last Year's

Tanabe Engineering Corporation (TSE:1828) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of June to ¥70.00. This makes the dividend yield 3.6%, which is above the industry average.

See our latest analysis for Tanabe Engineering

Tanabe Engineering's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Tanabe Engineering is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 could rise by 8.7% over the next year if the trend from the last few years continues. 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.

Tanabe Engineering Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥8.50 in 2014, and the most recent fiscal year payment was ¥60.00. This means that it has been growing its distributions at 22% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Tanabe Engineering has grown earnings per share at 8.7% per year over the past five years. Tanabe Engineering definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Tanabe Engineering's payments are rock solid. While Tanabe Engineering is earning enough to cover the payments, the cash flows are lacking. We don't think Tanabe Engineering 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Tanabe Engineering that investors should take into consideration. 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.