TOKAI Holdings (TSE:3167) Will Pay A Dividend Of ¥17.00

The board of TOKAI Holdings Corporation (TSE:3167) has announced that it will pay a dividend of ¥17.00 per share on the 1st of December. This makes the dividend yield 3.2%, which will augment investor returns quite nicely.

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TOKAI Holdings' Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, TOKAI Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 3.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

Check out our latest analysis for TOKAI Holdings

TOKAI Holdings Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥12.00 in 2015, and the most recent fiscal year payment was ¥34.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 3.1% a year for the past five years, which isn't massive but still better than seeing them shrink. The company has been growing at a pretty soft 3.1% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

We Really Like TOKAI Holdings' Dividend

Overall, we like to see the dividend staying consistent, and we think TOKAI Holdings might even raise payments in the future. 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. All of these factors considered, we think this has solid potential as a dividend stock.

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. Taking the debate a bit further, we've identified 1 warning sign for TOKAI Holdings that investors need to be conscious of moving forward. 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.