TOCALOLtd (TSE:3433) Is Due To Pay A Dividend Of ¥25.00

The board of TOCALO Co.,Ltd. (TSE:3433) has announced that it will pay a dividend of ¥25.00 per share on the 26th of June. The yield is still above the industry average at 3.0%.

View our latest analysis for TOCALOLtd

TOCALOLtd's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite comfortably covered by TOCALOLtd's earnings, but it was a bit tighter on the cash flow front. The business is earning enough to make the dividend feasible, but the cash payout ratio of 80% indicates it is more focused on returning cash to shareholders than growing the business.

The next year is set to see EPS grow by 12.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 51%, which is in the range that makes us comfortable with the sustainability of the dividend.

TOCALOLtd Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ¥11.25 in 2014, and the most recent fiscal year payment was ¥52.50. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately, TOCALOLtd's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each 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. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On TOCALOLtd's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While TOCALOLtd is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.