Tenox (TSE:1905) Is Due To Pay A Dividend Of ¥26.00

Tenox Corporation's (TSE:1905) investors are due to receive a payment of ¥26.00 per share on 30th of June. However, the dividend yield of 4.0% is still a decent boost to shareholder returns.

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Tenox's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Tenox's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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.

If the trend of the last few years continues, EPS will grow by 16.8% over the next 12 months. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Tenox

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ¥16.00 in 2015, and the most recent fiscal year payment was ¥52.00. This means that it has been growing its distributions at 13% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Tenox has impressed us by growing EPS at 17% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Tenox's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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 3 warning signs for Tenox you should be aware of, and 1 of them is significant. Is Tenox 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.