Tsugami (TSE:6101) Is Paying Out A Dividend Of ¥24.00

Tsugami Corporation (TSE:6101) will pay a dividend of ¥24.00 on the 2nd of December. This makes the dividend yield 3.3%, which will augment investor returns quite nicely.

View our latest analysis for Tsugami

Tsugami's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Tsugami's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Unless the company can turn things around, EPS could fall by 0.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 49%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Tsugami Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of ¥12.00 in 2014 to the most recent total annual payment of ¥48.00. This means that it has been growing its distributions at 15% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Unfortunately, Tsugami's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Tsugami's Dividend

Overall, we think Tsugami is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Tsugami management tenure, salary, and performance. Is Tsugami not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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