Tenryu Saw Mfg's (TSE:5945) Dividend Will Be Reduced To ¥79.00

Tenryu Saw Mfg. Co., Ltd.'s (TSE:5945) dividend is being reduced from last year's payment covering the same period to ¥79.00 on the 29th of June. The dividend yield of 3.7% is still a nice boost to shareholder returns, despite the cut.

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Tenryu Saw Mfg's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Tenryu Saw Mfg was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 11.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 41% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Tenryu Saw Mfg

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ¥35.00 total annually to ¥79.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.5% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Tenryu Saw Mfg has seen EPS rising for the last five years, at 12% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Tenryu Saw Mfg Looks Like A Great Dividend Stock

Overall, we think that Tenryu Saw Mfg could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Tenryu Saw Mfg (of which 1 shouldn't be ignored!) you should know about. 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.