TOCALOLtd (TSE:3433) Has Announced A Dividend Of ¥25.00

TOCALO Co.,Ltd. (TSE:3433) will pay a dividend of ¥25.00 on the 26th of June. The yield is still above the industry average at 3.1%.

See our latest analysis for TOCALOLtd

TOCALOLtd's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, TOCALOLtd was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 12.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 51% by next year, which is in a pretty sustainable range.

TOCALOLtd Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ¥11.25, compared to the most recent full-year payment of ¥52.50. This works out to be a compound annual growth rate (CAGR) of approximately 17% 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.

TOCALOLtd May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, TOCALOLtd's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 1.4% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On TOCALOLtd'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. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments TOCALOLtd has been making. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on TOCALOLtd management tenure, salary, and performance. Is TOCALOLtd 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.