Taisei Oncho's (TSE:1904) Dividend Will Be Increased To ¥87.00

Taisei Oncho Co., Ltd.'s (TSE:1904) dividend will be increasing from last year's payment of the same period to ¥87.00 on 12th of December. This will take the annual payment to 4.0% of the stock price, which is above what most companies in the industry pay.

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Taisei Oncho's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Taisei Oncho is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 7.0% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 45%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Taisei Oncho

Taisei Oncho 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 ¥174.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% 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.

We Could See Taisei Oncho's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. Taisei Oncho has seen EPS rising for the last five years, at 7.0% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Taisei Oncho's prospects of growing its dividend payments in the future.

Our Thoughts On Taisei Oncho's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Taisei Oncho that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.