Tomoe Engineering (TSE:6309) Has Announced That Its Dividend Will Be Reduced To ¥26.00

Tomoe Engineering Co., Ltd. (TSE:6309) has announced that on 2nd of February, it will be paying a dividend of¥26.00, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 3.1% will still be comparable to other companies in the industry.

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Tomoe Engineering's Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Tomoe Engineering was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 5.6%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 76% - on the higher side, but we wouldn't necessarily say this is unsustainable.

View our latest analysis for Tomoe Engineering

Tomoe Engineering 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. Since 2015, the dividend has gone from ¥15.00 total annually to ¥50.33. This means that it has been growing its distributions at 13% 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

The company's investors will be pleased to have been receiving dividend income for some time. Tomoe Engineering has impressed us by growing EPS at 25% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Tomoe Engineering's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Tomoe Engineering that investors should take into consideration. 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.