TOCALOLtd (TSE:3433) Is Due To Pay A Dividend Of ¥28.00

The board of TOCALO Co.,Ltd. (TSE:3433) has announced that it will pay a dividend of ¥28.00 per share on the 4th of December. This takes the dividend yield to 3.1%, which shareholders will be pleased with.

Check out our latest analysis for TOCALOLtd

TOCALOLtd's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, TOCALOLtd is earning enough to cover the payment, but then it makes up 115% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

The next year is set to see EPS grow by 11.8%. If the dividend continues on this path, the payout ratio could be 54% by next year, which we think can be pretty sustainable going forward.

TOCALOLtd Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ¥11.25 in 2014 to the most recent total annual payment of ¥58.00. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. 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.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 3.5% per annum over the last five years, which admittedly is a bit slow. The company has been growing at a pretty soft 3.5% per annum, and is paying out quite a lot of its earnings to shareholders. 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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think TOCALOLtd will make a great income stock. While TOCALOLtd is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for TOCALOLtd that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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