TOTO (TSE:5332) Has Affirmed Its Dividend Of ¥50.00

The board of TOTO LTD. (TSE:5332) has announced that it will pay a dividend of ¥50.00 per share on the 4th of June. The dividend yield will be 2.6% based on this payment which is still above the industry average.

View our latest analysis for TOTO

TOTO's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. But before making this announcement, TOTO's earnings quite easily covered the dividend. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

The next year is set to see EPS grow by 5.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ¥52.00 total annually to ¥100.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.8% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. TOTO might have put its house in order since then, but we remain cautious.

TOTO Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that TOTO has grown earnings per share at 8.1% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for TOTO's prospects of growing its dividend payments in the future.

Our Thoughts On TOTO's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for TOTO that investors need to be conscious of moving forward. Is TOTO not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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