Toyo Tanso (TSE:5310) Is Paying Out A Larger Dividend Than Last Year

The board of Toyo Tanso Co., Ltd. (TSE:5310) has announced that it will be paying its dividend of ¥120.00 on the 31st of March, an increased payment from last year's comparable dividend. This makes the dividend yield 2.9%, which is above the industry average.

View our latest analysis for Toyo Tanso

Toyo Tanso's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Toyo Tanso was paying only paying out a fraction of earnings, but the payment was a massive 151% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Over the next year, EPS is forecast to expand by 8.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 30% by next year, which is in a pretty sustainable range.

Toyo Tanso Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ¥22.00 in 2014, and the most recent fiscal year payment was ¥120.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% 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.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Toyo Tanso has impressed us by growing EPS at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Toyo Tanso's payments are rock solid. While Toyo Tanso 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Toyo Tanso that you should be aware of before investing. 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.