Chugai Ro (TSE:1964) Is Increasing Its Dividend To ¥120.00

Chugai Ro Co., Ltd. (TSE:1964) will increase its dividend from last year's comparable payment on the 20th of June to ¥120.00. This will take the dividend yield to an attractive 3.5%, providing a nice boost to shareholder returns.

View our latest analysis for Chugai Ro

Chugai Ro's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Chugai Ro was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 8.3% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.

Chugai Ro Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the dividend has gone from ¥50.00 total annually to ¥120.00. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Chugai Ro has impressed us by growing EPS at 8.3% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Chugai Ro's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Chugai Ro's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Chugai Ro that you should be aware of before investing. Is Chugai Ro 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.