TOCALOLtd's (TSE:3433) Dividend Will Be Increased To ¥33.00

TOCALO Co.,Ltd.'s (TSE:3433) dividend will be increasing from last year's payment of the same period to ¥33.00 on 30th of June. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.

See our latest analysis for TOCALOLtd

TOCALOLtd's Future Dividend Projections Appear Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, TOCALOLtd's dividend was only 24% of earnings, however it was paying out 4,617% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 10.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

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. The dividend has gone from an annual total of ¥11.25 in 2014 to the most recent total annual payment of ¥66.00. This means that it has been growing its distributions at 19% per annum 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.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that TOCALOLtd has been growing its earnings per share at 10% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for TOCALOLtd's prospects of growing its dividend payments in the future.

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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 TOCALOLtd that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.