Taihei Dengyo Kaisha's (TSE:1968) Dividend Will Be Increased To ¥150.00

Taihei Dengyo Kaisha, Ltd. (TSE:1968) will increase its dividend from last year's comparable payment on the 28th of June to ¥150.00. The payment will take the dividend yield to 2.9%, which is in line with the average for the industry.

See our latest analysis for Taihei Dengyo Kaisha

Taihei Dengyo Kaisha's Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Taihei Dengyo Kaisha was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 3.9%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ¥30.00, compared to the most recent full-year payment of ¥150.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Taihei Dengyo Kaisha has seen EPS rising for the last five years, at 29% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Taihei Dengyo Kaisha's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Taihei Dengyo Kaisha that investors should take into consideration. Is Taihei Dengyo Kaisha 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.